Dollar Could Steer Stocks in Coming Week

NEW YORK (TheStreet) -- Dollar-centric swings in the equity market may be exaggerated on light volume in the coming week as the U.S. takes a breather to celebrate the Thanksgiving holiday.

Although over the longer term, the dollar's value doesn't tend to move in tandem with stock prices, the market has been more closely attuned to currency fluctuations of late.

"You know how they say real estate is all about 'location, location, location'?" says Yu-Dee Chang, principal for the investment advisory firm Ace Investment Strategists. "Well, people have been joking lately ... [that] the direction of many markets is 'the dollar, the dollar, the dollar.'"

> > Bull or Bear? Vote in Our Poll

The dollar has recently been used as an explanation for all sorts of trends and forecasts, from gold's strength and stocks' weakness, to earnings and trade fluctuations. At the center of the debate is massive spending by the U.S. government to stabilize the financial system and kick the economy into gear. The Federal Reserve has promised cheap money for an "extended period," making some trades against the dollar appear more attractive.

For instance, gold has made a tremendous climb on such sentiment this year, hitting a record of $1,153.40 an ounce on Nov. 18. The greenback hit a 15-month low against a basket of major currencies a couple sessions earlier. But stocks sputtered on Friday afternoon as the dollar strengthened and cash poured into Treasury bonds.

"One theory gaining credence these days says the weak dollar is pushing up stocks," Peter Cohan, a venture capitalist and consultant at Peter S. Cohan & Associates, said in a recent report. "If you think this theory has any credence, then you should invest in stocks for at least the next two years."