Just when nibbling at a dollar rally started to look safe — bam! The real world of rising risk reared its ugly head again.

Two markets that reflect risk are the stock market and crude oil. The stock market because it’s the quintessential risk asset class. And crude because higher prices threaten economic growth and add to inflation expectations.

Both of these markets can greatly affect the U.S. dollar. Today, I’d like to explain what this risk correlation means for the greenback going forward.

Let’s start with …

A Graphic Tour of the
Dollar-Stock Relationship

The dollar, more than any other currency lately, has been the one most negatively impacted by market risks such as deterioration in the credit market or trouble for the U.S. economy. …