Trading America's Stock: Dollar Drifts Near 2-Year Low On Possible Rate Cut, Recession Fears
America may lead the world in countless ways, but the stock of our nation, (the dollar) hardly makes the top of the list. In fact, the U.S. dollar dropped to a 2-year low this week on fears of a slowing economy and rising trade deficit. What's the smart trade as the dollar drifts?
Eric Bolling explains as the dollar weakens, American based companies that sell products overseas take in foreign currency, (think Euros) but then repatriate that money back into dollars. When the dollar gets weaker, those companies get more dollars for the same Euros. That’s called “the currency effect” and it can be very advantageous for many American companies.
For example 49% of Cisco (CSCO) revenue comes from outside the US, as does 65% of Hewlett-Packard (HPQ) revenues and 66% of Autodesk (ADSK) revenues.
Dylan Ratigan asks if you buy into the global slowdown argument is the weaker dollar a problem?
Eric Bolling says in theory, but major players on Wall Street expect bigger growth internationally.
Tim Strazzini adds "the currency effect” provides a tailwind for companies. He sees it in Merck (MRK) and Dupont (DD), and says it’s a nice reason to buy a stock.
Jeff Macke says it’s more of a boon for the business itself, rather than the stocks. Take Nike (NKE) for example, he says. Yesterday, they reported 11% growth in Asia. 3% came just from currency trade.
Dylan Ratigan says the bottom line is, traders don’t necessarily pick a stock for the currency effect – but if they already like a stock – this makes them like it more.
On MAR 23, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Bolling Gold, Silver Strazzini Owns (T), (VZ), (MPEL), Soybeans, Is Short Corn