Why a weak dollar is good for your investment

Article Illustration Why Weak Dollars Are Good For Your InvestmentThe image: Andy Dean Photography (Shutterstock)

In form of The economy struggles, It has been a rough month for the US dollar. Our currency may be on track for the weakest month in nearly a decade, according to Wall Street Journal. Two things have led to the recent decline: our coronovirus outbreak and low interest rates From the Federal Reserve.

As a result, investors are selling US dollars and buying other currencies in places with lower levels of transition. While a weak US dollar can be costly when you are traveling abroad, Money againPorts This can be a good thing for your investment portfolio – here’s why.

How a weak dollar affects US stocks

As the US dollar declined, American products became less expensive overseas. This creates more competitive pricing for companies selling products elsewhere. For example, when an American company makes a $ 2 product and sells it to another country for $ 1.85, the cheaper price creates more demand.

According to Money, some of the companies that will benefit may already be part of your portfolio – such as those represented in the S&P 500. The weak dollar may have the greatest impact on US companies doing business abroad, such as those focused on technology companies, versus companies. Domestic businesses — such as utilities or telecommunications companies.

How does a weak dollar affect foreign stocks

More good news: A weaker US dollar can have a positive impact on foreign investment in your portfolio. When you buy foreign investment, you are investing in two things – foreign stocks And foreign currency.

When you have foreign stocks and the US dollar weak, you Get a boost From the return of the owner of the foreign currency. This means that you make a profit when the currency is translated back into US dollars.

What to expect in the future

Unfortunately, no one can predict how the US dollar will fare in the future. But if we continue to struggle with coronovirus infections – and government stimulus continues – experts say the US dollar may remain weak for a while.


Leave a Reply

Your email address will not be published.