Is the falling dollar driving the stock market up?

Barry Ritholtz from the big picture had this interesting comment on the cause of the recent market rally. Actually the comment came from Art Cashin.

To quickly summarize: Weak dollar good for equities and commodities.


“Dollar Hits New Low For 2009. S&P Makes New High For 2009, Duh!While economic data continues to come in “less bad”, many traders are pointing to the inverse relationship of the dollar to the market as the influence for movement.Yesterday, the dollar fell and oil, stocks and commodities rose. Late in the day, oil pulled back as it hit chart resistance and recoiled.There is speculation among brokers that a “dollar carry trade” may be evolving. For decades, arbitrageurs would borrow money in Tokyo at zero percent and short the yen. They would then take the “free money” and buy commodities, crude, high yielding bonds and even stocks. With U.S. rates held at zero for months, traders wonder if an American version of the “carry trade” is beginning to evolve.Whatever the source, there is no denying the influence of dollar movements across asset classes. It is clearest against oil and commodities but quite evident versus stocks.