Why does US stock rise but the dollar is falling?

The S&P is rising and rising.

Meanwhile, the USD is falling.

I wonder why that is the case. If money is flowing into the US, that should make their currency stronger.

Or am I missing something?

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Another explanation is that trillions of USD are being created, which increases money supply and decreases the value of one unit of USD relative to this total money supply.

It is natural for American stock, valued in USD, to increase as a consequence, as well as gold, cryptocurrencies and safe-haven currencies like CHF. In the long term, we may also see consumer prices increase (inflation), even though these days even this is pretty uncertain.


If the USD falls it increases the profitability of companies doing business outside of the US. Part of the increase in the US stock market is the result of the latter. On the opposite side the increase of EUR causes EU exporters to suffer and results in a decrease of their margin.

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Falling USD is likely due to the massive new supply of USD due to covid crisis. Also, while the stocks making up the S&P have largely recovered, many US SMEs are still suffering under covid measures, and these make up a significant portion of the real economy. It’s also fair to say that a fair part of stock market recovery has been based on speculation and/or anticipated future value, rather than the actual performance of economies. The value of currencies, on the other hand, is much more directly linked to real economies.


As explained differently by others, the reason is that the money flow is endogenous, from the Fed (the US central bank) to the US financial markets.
With the Covid, the Fed has extended the scope of its purchases from the Treasuries and Mortgage-Based-Securities, to corporate bonds, including junk bonds. The last thing they don’t seem to do yet is to buy stocks directly, but since they buy everything else in the market, they make stocks look more attractive, compared to bonds.
If you look in Latin America, there are more noticeable examples of falling currencies with rising stock indices.


High inflation expectations


Interesting answers, thank you all. I must further look into this, I don’t think there’s only one easy answer. Also, USD has become weaker against CHF but less so against EUR.

Yes, that is exactly the long term trend and the predictions made for today and for the future as well. Nothing new, nothing unexpected.

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