like economic warfare, has been a rough month for the US dollar. Our currency may be on track for the weakest month in almost a decade, according to Wall Street Journal. Two things have caused the recent downfall: Our coronavirus outbreak and low interest rates from the Federal Reserve.
As a result, investors have sold the US dollar and bought other currencies in countries with lower levels of infection. While a weak US dollar can be costly when traveling abroad, New moneyports can be a good thing for your investment portfolio – here’s why.
How a weak dollar affects US stocks
As the US dollar falls, US products become less expensive abroad. This creates more competitive prices for companies selling products elsewhere. For example, when an American company creates a $ 2 product and sells it for $ 1.85 in another country, the cheaper price sparks more demand.
By money, some of the companies that will benefit may already be part of your portfolio – such as those represented on the S&P 500. A weak dollar could have the biggest impact on US companies doing business abroad, such as tech companies. , versus companies focused on local business – such as utilities or telecom companies.
How a weak dollar affects foreign stock
There is more good news: the weak US dollar could have a positive impact on the foreign investment of your portfolio. When buying foreign investment, you are investing in two things – foreign stock and foreign currency.
When you own foreign stocks and the US dollar weakens, you get a boost from the return of foreign currency possession. That means you make a profit when the currency is back in US dollars.
Tofars to expect in the future
Unfortunately, no one can predict how the US dollar will release in the future. But if we continue to fight coronavirus infections – and government stimulus continues – experts say the US dollar may remain weak for some time.