It's over !

It's a story I have been tracking for over 3 months now, even stopped following currencies as lead indicators in the trading room and can now declare that the co-relation is over.

The co-relation is that of equities and the dollar.

Take a look at some charts below of the USD/ Euro and the Nifty spot :

This is the euro against the Nifty spot.

Historically euro up has equated to a NF up.

The next chart is of the dollar and the Nifty

Yes the two rectangles are both pointing down from 2011.

and the dollar and the euro ( seems all right here)

Next time if somebody tells you that Dollar down equals equities up, tell them to have a look at these charts.

As a leading emerging market player, the story seems to be a bit more than what the charts are projecting at the moment.

In fact if the charts play out through 2011, we will soon have the rest of the equity world stand neck to neck with our dear Nifty.

The charts clearly show that our stocks have decoupled from their inverse correlation with the dollar and the Nifty seems over eager to join the dollar down bar for bar.



The decoupling may be due to rising inflation which eventually will hit at profit margins causing equities to run the same was as currencies are now running. It would also mean a strong flow into commodities and the recent buying tail which we saw in gold futures just after the balanced profile may be a sign that that particular low will be here for some time to stay.


When all that happens, the dollar will be buried as the reserve currency of the world ( about mid 2012 ) and the grounds may be ripe for a new bull market to emerge from there.


Of course, currently the dollar is hanging onto a slender thread ( red horizontal line) , but it is hard to see it not fall off by another 10 % to about 67 thereabouts.


For those who think that that 10 % fall ( hopefully in next 3 months) will be matched by a 10 % rise in our markets will have to look back at the charts again.


It's not happening...