Since the failure of Lehman Brothers 15 months ago, the rule has been that when stocks and commodities rise, the dollar falls.
But now that rule has been turned on its head.
The dollar is gaining in synch with stocks and commodities. That’s a bullish sign for the greenback.
With the U.S. Dollar Index rising at its fastest rate in 10 months, the dollar, stocks and commodities are set for their first simultaneous two-month gain since the Lehman Brothers crisis in September 2008, Bloomberg reports.
Until now, investors bought dollars when they sought a safe haven, shying away from the risk of stocks and commodities. Similarly, when they bought stocks and commodities, they saw no need for dollars.
But now, with the economy showing signs of recovery, investors are starting to anticipate a Federal Reserve interest rate hike.
A rate hike is bullish for the dollar because it means investors can earn higher yields by putting their money into the U.S. currency.
“The tremendous dollar-negative sentiment is being corrected,” Adnan Akant, head of foreign exchange at Fischer Francis Trees & Watts, told Bloomberg. He reversed his bet against the dollar two weeks ago.
Even investment legend Jim Rogers, who is extremely bearish about the U.S. economy, says the dollar has room to rise in the short term.
“I would expect a rally, whether it lasts a quarter or a year, I have no idea,” he told Newsmax.
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