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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: t2 who wrote (81017)6/18/2002 9:07:30 PM
From: Zeev Hed  Read Replies (2) of 99280
 
There are few ways in which a weaker dollar can hurt US equities:

1. A weaker dollar could increase inflation (and thus put pressure on rate competing with equities).

2. Great weakness of the dollar can force repatriation of US dollar denominated assets (stocks and bonds, thus causing yield on bonds to rise and price of equities to fall)

3. A major danger is a catastrophic rapid change in th dollar's value relative to other currencies. That could create destabilization and "freeze up" of the financial markets as hedged situations (such as the Yen carry trade and equivalent) are unwound in illiquid markets.

The only benefit of a weaker dollar is for major exporters, and for companies deriving a large portion of their revenues overseas, the former become more competitive, the latter report higher revenues in dollars for the same sales in foreign currencies.

Zeev
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