The US dollar's decline is good news for mega-cap tech stocks

The dollar dipped by nearly 3% in the past week and tech stocks rallied on it

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U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009.
Photo: Rick Wilking (Reuters)

The US dollar was somewhat stable in the first six months of the year but has now reached a tipping point, weakening rapidly in the face of slowing US inflation. The greenback’s decline is a boon for companies that generate a large share of their revenue internationally, and that includes the largest tech stocks. 

“Ironically enough, weaker than expected inflation data resulted in a sharp decline in the dollar, which resulted in any financial asset (besides natural gas) priced in dollars to go up in price,” analysts at Bespoke Investment Group noted in a July 14 report. 


The price of the dollar in comparison to other currencies is affected by US interest rates set by the Federal Reserve. When rates rise, as they did in 2022 and the first half of 2023, the dollar is more attractive. With inflation now slowing, it’s possible the Fed could be done hiking after July.

The Bloomberg Dollar Index has been trading at its lowest level in 15 months. In the past week ending on Thursday, the index fell by 2.7%. As Bespoke pointed out, there have only been five other times since 2004 where the index has fallen by more than 2.5% after at least six months of relative stability.


Who benefits from a falling US dollar?

This drop has impacted stocks dependent on international revenue the most positively. Companies with the most exposure to international revenue saw their shares increase an average of 5.42% this week, Bespoke noted, while more domestically dependent companies have seen their shares rise between 3% and 4%.

Tech companies with market capitalizations above $200 billion in the NYSE FANG+ index, which includes Meta (META), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOGL), among others, reached a new all-time high on July 13. Before then, the index hadn’t seen an all-time high since November 2021. Meanwhile, broader market gauges like the S&P 500 and the Nasdaq remain 6% below their prior all-time highs, Bespoke noted.