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L.8 · BEGINNER · 2 MIN

Trade, Exchange Rates, and the Dollar

Over 40% of S&P 500 revenue comes from abroad. The value of the dollar directly affects corporate earnings, trade flows, and investment returns.

Quiz · 5 questions ↓
§ 01
Dollar StrengthWinnersLosers
Strong dollarUS importers, travelers abroad, foreign bond buyersUS exporters, multinationals, emerging markets
Weak dollarUS exporters, multinationals, commodity producersUS importers, travelers, foreign debt holders
§ 02

When the dollar strengthens, multinational companies like Apple and Coca-Cola earn less when they convert foreign revenue back to dollars. This is called currency translation risk.

§ 03
Check the **FX** section in the Markets view for current dollar index (DXY) and major currency pairs.
§ 04
Brazilian agribusiness exports $500M of beef to China, invoiced in USD. Over 6 months, the Brazilian real strengthens 15% against USD. The company is unhedged. What happens to its peso-equivalent revenue?
§ 05

Currency is the hidden variable in global investing. A foreign stock might gain 15% in local currency but only 5% in dollar terms if the dollar strengthened.

Five questions · AI feedback

Sit with the ideas.

The Fed raises rates aggressively while the European Central Bank holds steady. The dollar strengthens 12% against the euro over 6 months. Which of the following is the most likely consequence?

Why:

Other lessons in this course.

  1. 01Inflation: What It Is and Why It Matters
  2. 02The Fed and Interest Rates: How Policy Moves Markets
  3. 03The Yield Curve, in Plain English
  4. 04GDP: What the Economy Actually Produces
  5. 05The Business Cycle: Timing the Economic Seasons
  6. 06Fiscal Policy: Government Spending, Taxes, and Deficits
  7. 07The Fed’s Advanced Toolkit: QE, QT, and Forward Guidance
  8. 08Trade, Exchange Rates, and the Dollar— reading now
  9. 09Financial Crises: How Economies Break Down
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