No Holiday Cheer for the Dollar

A run on the dollar the day before Thanksgiving feels vaguely like It's a Wonderful Life. But the greenback likely doesn't need an angel to pull it back from the edge of despair.

The dollar broke through some key resistance levels vs. the euro and the Japanese yen Wednesday. But as long as it only frays the outside edges of its trading range, the stock and bond markets will likely shrug off its dip. At least, that was the case Wednesday when the dollar fell to a 5 1/2-month low vs. the euro intraday, as the single currency brushed up against the psychologically important $1.30 level (the euro's closing high for the year was $1.2979).

The dollar rebounded slightly as the day progressed, leaving a complete breakdown an unlikely scenario, at least for the time being. The euro finished the New York trading day up 0.77% to $1.2942. The dollar fell 1% vs. the yen to 116.66 yen.

The dollar's weakness, and expectations for a larger drop, may be part of why the Dow Jones Industrial Average has outperformed in the rally since late July. In times of dollar weakness, investors often shift into large-cap, multinational companies that garner revenue from overseas sales, such as Dow members Intel(INTC Quote) and McDonalds(MCD Quote).

On Wednesday, the Dow finished the day up fractionally to close at 12,326.95, while the S&P 500 gained 0.2% to close at 1406.09. The Nasdaq Composite added 0.5% to close at 2465.98 on the day thanks to big percentage moves in tech components Dell (DELL Quote), Brocade (BRCD Quote) and Cray Research (CRAY Quote).