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The Inform: The "greenback smile": The US foreign money does effectively when the inventory market both bounces or crashes

A happy currency?

federico parra / Agence France-Presse / Getty Images

HSBC analysts tested the so-called "dollar smile theory" for this year's manic movement in the markets. What HSBC found was that the dollar rose both on days when the S&P 500 fell sharply and on days when it jumped large.

"What we find is that the dollar smile is not just a theoretical concept, it actually works in practice," say analysts Daragh Maher and Dominic Bunning.

Measured with the DXY
DXY,
+ 0.26%
Dollar index, analysts said the dollar rose on days when the S&P 500 rose 51%
SPX,
-0.81%
fell by more than 0.5%. The dollar rose 57% on days when the S&P 500 fell more than 1.5%.

The dollar is also sensitive to major S&P 500 rallies. The dollar rose 59% of the time the S&P 500 rose at least 2%.

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