Somebody help me out here: why does the market like a low Dollar?

[bluestateguy]

and yet the market seems to punish a high Dollar.

Forgive me for my confusion here.

[BzaDem]

1. A low dollar helps bring jobs and business to the US.

If you are a person in France (let's say), and the dollar keeps getting lower and lower, that means you can buy more and more American goods for the same price in Euros. This drives up business in the US.

If the dollar is very high, then international business to US firms declines.

[DBoon]

2. US companies have substantial overseas operations

A lower dollar means these are valued more highly, if measured in dollars

e.g., real estate or a factory in France is worth more in dollars if the dollar drops in value.

Stock price reflects overall value of assets behind the stock

[jwirr]

3. It allows all those outsourcers to import their junk cheaper so we can

afford it?

[DBoon]

5. capital is global

They make it in China, sell it to France, their stock is traded in New York, and the share holders are Canadian.

America is a brand name. It has nothing to do with where something is made or sold.

[jwirr]

6. It matters to the workers.

[DBoon]

15. capital is global, workers are local

one reason workers get the short end of the stick

[robinlynne]

10. jsut the opposite. it allows other countries to buy our stuff cheaper.

We export more than we import when the dollar is low.

[jwirr]

14. If we made stuff. We are no longer manufacturing most things.

[dmallind]

12. Other way round

Imports become very expensive when the dollar is weak - outsourcers have to pay for goods from countries with floating currencies. The weak dollar encourages exports rather than imports, as foreign buyers have to pay less of their currency to buy our goods.

[NJmaverick]

4. Here is one factor- Low dollar equals higher oil

higher oil means the energy company stocks are higher.

[kenny blankenship]

7. As the buck is devalued, people with dollars pile into equities

your purchasing power declines less quickly, compared to holding bonds. The policy of quantitative easing devalues the dollars that debt obligations will get paid back in. As that happens, do you want to park money in bonds with a fixed return that may be flat or negative? Of course you don't. Put it on Goog, and spin the wheel!

This is a chart of another stock market -from June of this year- also with forces of currency devaluation pushing on it.


Find out which stock market this here

[On the Road]

9. Yes, and a Substantial Part of That Effect

is due to international investors. A cheaper dollar makes US equities cheaper. If you're holding euros and the dollar drops, you just a discount for buying MSFT, C, or any other stock priced in dollars.

[harun]

8. They don't necessarily like it, a low dollar means stock prices will

be represented as requiring more dollars, thus it falsely makes it look like stocks are worth more. They aren't worth any more if the value of the dollar goes down when they go up. They could actually be worth the same or less. From a world wide value point of view anyway. Locally it could be different.

But like others have said your export business's can do better with a weak dollar.

I think Obama should be taking the opposite strategy. Like Bill Clinton did. Less military spending, less deficit, stronger dollar = cheaper energy (spec. oil) = more money for the rest of the economy. Instead he is increasing funds to War and increasing the deficit, which IMHO is his biggest mistake to date.

[arthritisR_US]

11. low dollar makes your goods and services much more attractive. n/t

[snagglepuss]

13. .

[applegrove]

16. A low dollar makes things made or done inside the USA more productive that

stuff made or done outside the USA.

[Nikki Stone1]

17. Can pay back debt to China in cheaper dollars.

...

[L. Coyote]

18. Simple enough. You need more cheap dollars to buy the same % of a company.

just like you need more dollars to buy the same number of yen or euros when the dollar falls.

I was in a bank in Mexico when a woman brought in a huge pile of dollars in cash, money earned in the USA. She put them in a pesos account. Then the peso was devalued from 12 to buy a dollar to about 22. So, if she wanted to buy dollars with her pesos, she would have been able to buy back just over 50% of her money! If she had opened a dollars account, she could have bought nearly 50% more pesos after the devaluation.

We were traveling with dollar travelers checks. Because the local economy takes a while to adjust, we suddenly could eat twice as much for the same money.

[TexasObserver]

19. (1) helps exports compete internationally, (2) makes debt repayment easier

Those are the big two.


Also helps sell US properties, such as real estate, to foreigners.