A weakening in the U.S. currency may create headwinds for equity multiples, in which case investors may benefit from asset and geographic diversification in their portfolios. We encourage investors to keep an eye on the U.S. Dollar Index (DXY), which tracks the dollar's value relative to a basket of foreign currencies.
It's possible that demand for U.S. goods abroad would decrease if international consumers can't afford to buy those goods. American workers could then be negatively impacted. "The people who benefit from the strong dollar are usually different people than would benefit from the weak dollar," James said.
In general, a stronger dollar is likely to be both a market and economic positive. Since 1980, the stock market has performed twice as well during dollar bull markets than dollar bear markets and has posted gains every year following years when the dollar appreciated by more than 10%5.
If a U.S. company exports goods and services when the dollar is falling, it is likely to sell more products because it takes less foreign currency to get U.S. dollars to pay for the goods. That is why a weak dollar is good for exporters but horrible for importers.
1. Kuwaiti dinar. The Kuwaiti dinar (KWD) is the world's strongest currency, and this is for a number of reasons. For starters, Kuwait has one of the largest oil reserves in the world.
Precious Metals: Gold and silver other metals have historically served as stores of value during economic turmoil. They are tangible assets with limited supply and industrial uses. Cryptocurrencies: Some view certain cryptocurrencies, like Bitcoin, as a potential alternative to traditional currencies.
More important to an investor is the impact of the dollar's rise or fall on the individual stocks they own. Companies that rely on imports thrive when the U.S. dollar is strong. Companies that sell their products globally thrive when the dollar is weak.
You can invest directly in the currency, currency baskets, or exchange-traded funds (ETFs). Investing in the stock market indexes of countries that you believe will have appreciating currencies or investing in sovereign wealth funds can be a longer-term strategy and provide exposure to strengthening currencies.
In short, a weaker dollar means that Americans will find foreign goods to be relatively more expensive than before, but foreign consumers will find U.S. goods less expensive than before.
Your mortgage payments could change drastically because of a collapsing dollar, especially if you have an adjustable rate. Those interest rates would follow the trend of the economy itself, so if the Fed raises interest rates, mortgage rates will also climb. This would lead to volatility in your mortgage payments.
In 2024, the U.S. dollar has experienced notable depreciation against many major currencies due to anticipation of the Federal Reserve's first rate cut since the onset of the COVID-19 pandemic (rates were cut by 0.5% in September 2024).
So, if you believe a market is set to lose value, you can take short positions on stocks, indices, forex, commodities, interest rates and more. You'd then make a profit from a decline in your traded markets' price. However, if the price moves up, against your prediction, you'd incur a loss.
The U.S. dollar typically depreciates or weakens during a trade deficit but it's strengthened in some cases. Numerous variables drive exchange rates in addition to the balance of payments. They include investment flows into a country, economic growth, interest rates, and government policies.
Currently, if a company's stock falls below $1, it has 180 days to regain compliance with the minimum price requirement. If it fails to do so, the company can request an additional 180 days and, in some cases, appeal the delisting decision to a Nasdaq hearings panel.
If the US dollar were ever to collapse, those who own physical gold and silver coins and bars could find themselves positioned to weather the impact of that collapse better than those who rely solely on the dollar's current value. The weaker the dollar becomes, the stronger gold and silver should perform.
Made in America: U.S. Exporters and the Dollar
There are other benefits to a weaker dollar for large U.S. exporters. For starters, they can raise their domestic currency prices, which translate to the same price overseas. Higher prices equal higher profits.
The Kuwaiti Dinar is the world's highest-valued currency, reflecting Kuwait's strong economy and abundant oil reserves. Its stability and high exchange rate make it a sought-after currency in international markets. As of January 2025, 1 Kuwaiti Dinar is equal to approximately 279.10 Indian Rupees.
Key Takeaways. Stock price drops reflect changes in perceived value, not actual money disappearing. Market value losses aren't redistributed but represent a decrease in market capitalization. Short sellers can profit from declining prices, but their gains don't come directly from long investors' losses.
What Would Happen If the U.S. Dollar Collapses? If the U.S. dollar collapses: The cost of imports will become more expensive. The government wouldn't be able to borrow at current rates, resulting in a deficit that would need to be paid by increasing taxes or printing money.
CDs insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 cannot lose money even if the bank fails.
Dollar strength is expected to stabilize or persist into 2025 for several reasons. Economic growth differentials: The U.S. economy is projected to grow by 2.7% in 2024, outpacing the 1.7% growth forecast for all developed markets.