The, which follows the dollar against a weighted basket of six foreign currencies, including the and the, recently dropped to its lowest level since April 2022. This can reflect a lasting change in the preference of the Havennes among many investors and central banks.
About 40% of income comes from abroad, and a 3 to 4% drop in dollars considerably increases profits and is generally positive for shares. A low American dollar can benefit specific segments of the American stock market, but the overall impact depends on the broader economic context.
Positive points
American companies generating significant income abroad benefit from an advantage because their products become cheaper and more competitive worldwide. Eminent multinationals like McDonald’s Corporation (NYSE :), Procter & Gamble Company (NYSE :), and technological companies with significant international sales often see improved profits when the dollar weaken.
A lower dollar can also increase equity prices by making stocks denominated in dollars less expensive and more attractive for foreign investors.
As the dollar decreases, American goods and services become more affordable for international customers, so a weakened dollar can improve the competitiveness of exports. This change can increase the income of multinational companies, ultimately increasing their profits.
In addition, shareholders can benefit from higher dividends, as we can see with companies like McDonald’s and Procter & Gamble, which tend to increase dividends during periods of dollar weakness. Industries such as manufacturing, consumer goods, agriculture, technology, health care and energy will likely benefit from a lower dollar.
Historical context
The decline of the dollar is historically correlated with stronger performances in American actions, in particular those operating internationally. This relationship, however, is not absolute, and the dollar and actions can decrease in times of economic distress or uncertainty of commercial policy.
A lower advantage of American companies with significant international sales and exporters, but it can harm companies that depend on imports. The global effect on …
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