Watch Dollar’s Connection to US Equity Volatility, Goldman Says
TL;DR
Goldman Sachs highlights that the dollar's correlation with the VIX, not stock levels, is key. It shifted from positive to negative in 2025, making the dollar fall with rising volatility.
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For all the attention paid to the dollar’s changing correlation to the level of US stocks this year, Goldman Sachs Group Inc strategists argue that the more interesting linkage lies between the greenback and CBOE’s Volatility Index, or VIX.
Over the last five years, the dollar has typically been positively correlated with the VIX, an oft-cited measure of the expected volatility of the S&P 500 Index. The haven greenback rallied when US stock swings became more pronounced and vice versa. But that changed earlier this year and for much of 2025, the opposite has been true. If US equity market jitters are on the rise, there’s a good chance that the dollar is falling in concert.
“The focus on the FX relationship with the S&P 500 Index alone masks a lingering vulnerability for the dollar that is more evident in its correlation with the VIX over recent months,” a Goldman team including Michael Cahill and Karen Reichgott Fishman wrote Wednesday.
"The dollar’s reduced appeal is more evident in its correlation with the VIX, though recent days have looked more 'normal,'" the bank said
