Tech Stocks and USD?

Tech stocks have been rallying, pushing SP500 to record highs. NVIDIA’s earnings pushes indices around the world into a global rally.

Traditionally, rising stocks correlate with strong domestic currency. Higher tech stocks should strengthen the dollar, because more people want to buy stocks, which leads to foreign money flowing in, purchasing more USD, which is used to buy US stocks, driving USD up.

But we’re actually seeing the opposite. The dollar weakened last week, with EURUSD and GBPUSD both up, and USDX down. Why? In trying to find an answer, I saw the US treasury bond prices fell. Could it be that more dollars are being taken out of the bond market, and put into the stock market, effectively causing a sell-off of dollars in favour of buying stocks? If more dollars are exiting the bond market compared to foreign purchases of dollar coming in, then the overall USD direction would be down. Is this analysis correct?

If so, then it suggests that further rallies in the stock market would likely hurt the dollar more. And if stocks retrace, then the dollar might strengthen?

Tech stocks will follow the Nasdaq. Tech stocks are sensitive to rate increases. With the Fed’s rate hike cycle over, priced in are -75bps of USD rate cuts in 2024 (, sending tech to new highs. Any deviation from this will result in sharp movements to tech… more chances of cuts is better for equities, increased chances of hikes will cause a sell-off or pullback in equities.

The USDX and FX will ebb and flow. Last week was an ebb. Overall the USDX is up YTD, EU and GU are down.

Tech stocks and the USD (U.S. dollar) often exhibit an inverse correlation, meaning they tend to move in opposite directions. When tech stocks perform well, investors may allocate capital away from traditional safe-haven assets like the USD, leading to its depreciation. Conversely, during periods of market uncertainty or risk aversion, investors may flock to the USD, causing tech stocks to underperform. Traders should monitor both sectors closely and consider the broader market sentiment when making trading decisions involving tech stocks and the USD.