Market News

Summary

• Dollar Index down nearly 10% this year
• Weaker U.S. currency helps companies convert foreign earnings more favorably
• Every 10% drop in the dollar leads to a 2% earnings upside
• Analysts note broader economic and geopolitical factors could temper FX impact on stock prices

NEW YORK, July 16 (Reuters) - Large U.S. multinationals should soon start showing the positive effects of the dollar's tumble in recent months, reversing the situation in the past few years when the greenback's strength hurt companies with significant foreign revenue.
The Dollar Index (.DXY), which measures the buck's strength against six major currencies, is down about 10% for the year, due to rapidly changing U.S. trade policy and worries about U.S. growth and government debt.

About half of that drop happened since April 2, when U.S. President Donald Trump announced outsized import tariffs against trading partners that started a panic about investing in U.S. assets.

For the April-June period, the index, which is heavily weighted toward the euro, averaged 99.74, down 6.5% from the first quarter average, the largest such decline over consecutive quarters in more than 30 years. The effects of the dollar's slide are expected to start showing up in second-quarter earnings season just getting underway.

While that dollar's fall reflects investor worries about the U.S. economy's strength, it can help some companies. A weaker U.S. currency makes it cheaper for multinational companies to convert foreign profits into dollars, while also boosting the competitiveness of exporters' products.