When these companies report their financial results, they convert their foreign earnings into U.S. dollars. If the U.S. dollar weakens against the foreign currencies in which the earnings were generated, the translated value in U.S. dollars will be higher, leading to higher reported earnings. This in turn should result in higher equity prices.
Barron’s Letter to the Editor: How a Weaker Dollar Can Result in Higher Equity Prices
Barron’s published my Letter to the Editor:
Higher Equity Prices
To the Editor:
As noted by Ben Levisohn, the dollar has recently been declining, and a weaker dollar should be good for risk assets (“Inflation Rarely Falls This Fast. What It Means for the Stock Market,” Up & Down Wall Street, July 14). One additional reason for this positive impact is that a weaker dollar will result in higher reported earnings by U.S. multinational corporations.
David I. Kass
University of Maryland
College Park, Md.
