COMMENT-Dollar can slide while stocks supported, surge if they drop

March 6 (Reuters) - The dollar, which has plunged this week, may drop further while stock markets are supported - as is currently the case - but it could surge if they drop.

That is the clear risk should the trade disputes ignited by U.S. President Donald Trump's tariff threats become an all out war.

While some sharp moves in share prices have rattled markets in the past 17 years, none have lasted long and all have been followed by surges that have boosted major indexes to record peaks.

A trade war has the potential to spur a truly risk-averse reaction that drives equities much lower and spurs a flight to the safety of the dollar.

That certainly isn't the case now with this year's reverse for the S&P 500 mere froth off the top of a huge rise. So far the drop has fallen just short of the 200-DMA at 5728 which remains pivotal.

A minor correction for S&P rise from the low in November 2023 is 5355 and that is just a tiny fraction of its prior rise. A minor correction of the uptrend in the wake of the global financial crisis is 4043.

Even though it may be merely a reset of share prices that have become inflated beyond companies' financial fundamentals, a pullback of that extent could be seen as cataclysmic. Even the minor correction of the November 2023 - February 2025 rise would come as a shock, especially after so many dollars have been sold.