A Weak U.S. Dollar Not Necessary A Curse

The U.S. dollar is the world major currency that serves as a reference point for measuring and pricing other foreign currencies. Market participants and watchers that deal in FX from the busiest Wall Street market to the nimblest stand alone desk are left without a nanosecond to breathe, studying the pattern of movement of this major currency. After-all, if there is a change in its price, the entire world feels this pinch.

In the past years, this greenback has for long stayed ahead of its counterparts in times of purchasing power. However, this convention or cycle seems to fade away as the U.S. dollar keeps sagging having plummeted to a five month lows especially in the first quarter of 2016. This drop may be a reflection of the sluggish global economy that is grasping with low demand and commodity prices especially gold and crude oil.

A declining dollar looks more of a blessing than a curse for U.S. based companies as it boosts the competitiveness of the export market. Companies like Procter & Gamble could leverage on this weak dollar to increase their production units, sales, and up their bottom-lines.

Manufacturing and production opportunities existing in U.S. would be exploited, leading to jobs creation, and boost economic growth and development.

A protracted weak dollar could encourage long term capital investment in the U.S. economy as the prices of domestic goods and services would be relatively low. Some foreign investors or multinational companies could shift production and manufacturing setups or lines to the U.S. economy in order to leverage on the price differentials.

On the face of weak dollar, imported goods to the U.S. markets become expensive as the buying power of the U.S. dollar would be relatively lower against the other major currencies, and this could lead to reduced consumer spending.

Again, U.S. based firms would now be valued and priced relatively on the cheap and could fall prey to foreign acquisitions.

With companies likely to bolster their sales and profits due to the humbled greenback, it wouldn’t be surprising to see some executives of U.S. Multinational companies clamoring and cheering for further dip in the U.S. dollar against its major rivals than recorded in the first quarter of 2016.