As the the economy struggles, has been an approximate month for the US dollar. Our currency may be on track for the weakest month in a decade Wall Street Journal. Two things have caused the recent decline: The outbreak of our coronavirus and Low interest rates from the Federal Reserve.
As a result, investors were selling the U.S. dollar and buying other currencies in places with lower levels of infection. While a weak US dollar can be expensive when traveling abroad, Money againports can be a good thing for your investment portfolio – here’s why.
How a weak dollar has an impact on US stocks
As the U.S. dollar declines, U.S. products become less expensive abroad. This creates more competitive prices for companies that sell products elsewhere. For example, when an American company creates a $ 2 product and sells it for $ 1.85 in another country, the lower price raises more demand.
According to Money, some of the benefiting companies may already be part of your portfolio – such as those represented in the S&P 500. The weak dollar could have the biggest impact on U.S. companies doing business abroad, such as technology companies, versus home-focused companies – such as utilities or telecommunications companies.
How a weak dollar affects foreign stocks
There’s more good news: the weak U.S. dollar could also have a positive impact on your portfolio’s foreign investments. When you buy foreign investments, you are investing in two things – foreign stock u the foreign currency.
When you own foreign stocks and the US dollar weakens, you get a boost from the return of possession of the foreign currency. This means earning 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 come in the future. But if we continue to struggle with coronavirus infections – and government stimulus continues – experts say the U.S. dollar may remain weak for a while.