By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock market is paying more attention than usual to the movements of the U.S. dollar, with the greenback's newfound status as a funding currency leaving its moves highly correlated to equities and other riskier assets.
The greenback's status as both the world's reserve and funding currency means the Federal Reserve "still has the luxury of imposing its monetary policy on the global markets," said Dean Curnutt, president of Macro Risk Advisors LLC.
In essence, as Curnutt sees it, the central bank is managing "the most giant carry trade of all time," which has U.S. equities rising as the dollar weakens.
"These days, it all goes back to the dollar. The investment community tends to focus on something from time to time, right now it's the dollar," said Yu-Dee Chang, principal at ACE Investment Strategists LLC.
On Tuesday, Wall Street wavered between gains and losses after a two-day drop that had the Dow Jones Industrial Average (INDU 9,931, +62.80, +0.64%) losing more than 200 points. The Dow industrials were recently up 48.43 points, or 0.6%, at 9,917.39. The S&P 500 Index (SPX 1,069, +2.51, +0.24%) gained 2.24 points, or 0.2%, to 1,069.18, with consumer discretionary shares fronting the losses and energy shares up the most. The Nasdaq Composite Index (COMP 2,135, -7.12, -0.33%) fell 7.48 points, or 0.4%, to 2,134.37.
