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The Falling Dollar Effect

Markets

International stocks are cheaper than their U.S. counterparts and stand to benefit from further declines in the U.S. dollar (a weaker dollar makes foreign-priced shares worth more to U.S.-based investors). The U.S. dollar is down 12% since the start of last year and many believe the currency is still overvalued.

One caveat, however: the falling dollar could be a double-edge sword for foreign firms with large export businesses, where a weaker dollar will make competing U.S. goods cheaper by comparison. One place to look may be international small cap stocks, whose returns will benefit from a falling dollar but whose business are also predominantly transacted in their home market.

Source: NY Times


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