The U.S. dollar is looking shaky. Barring some sort of currency meltdown, a weaker dollar should be a positive for equities, though foreign stocks will likely benefit more, analysts said.
And a weaker dollar isn’t necessarily good for stocks if it reflects big problems on the domestic front. Meanwhile, the important thing to remember is that any currency’s performance reflects what market participants think of the prospects of a particular economy versus others. The case for U.S. underperformance is also backed up by a look at the negative correlation between the dollar and non-U.S. stocks, which is stronger than the relationship between the currency and U.S. equities, said Gaurav Saroliya, director of macro strategy at Oxford Economics, in a Thursday note .
“Far from being destabilizing for global markets and economy, those episodes were quite positive for growth,” he said, noting the inverse link between the dollar and global economic growth has existed for most of the era of free-floating exchange rates since the 1970s, while periods of rapid dollar appreciation have been more of a threat to global financial stability than large dollar declines.
Yes, but stock prices are measured in dollars.
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