TechFlow News: On April 14, the Iran conflict revived the traditional relationship between the U.S. dollar and stock market volatility: risk-averse investors are returning to U.S. assets—assets that had been sidelined following last year’s tariff turbulence. Since the outbreak of hostilities, the positive correlation between the dollar and the VIX (the “fear index”) has continued strengthening and is now nearing its highest level since the start of 2024, echoing the past five years’ pattern wherein the dollar rises during periods of market volatility and falls during calm periods. With the U.S. blocking the Strait of Hormuz, Scotiabank views the dollar–VIX relationship as particularly noteworthy—especially given the possibility that future equity market volatility may remain subdued. Sean Osborne, the bank’s Chief FX Strategist, stated on Monday: “If the situation in the Gulf fails to trigger a substantial and sustained rebound in the VIX, the dollar could extend its decline further.” (Jinshi)
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