Weaker Dollar Isn’t All Bad

QUESTION: The U.S. dollar has lost about 10% of its value since Jan. 1, 2025. What does that mean for my portfolio?

ANSWER: A weaker dollar often makes headlines—and it can stir anxiety for investors—but it’s not automatically bad news. In fact, when understood and managed thoughtfully, dollar weakness can create meaningful opportunities within a diversified portfolio.

Before going further, a word of caution. Predicting currency movements is notoriously difficult, especially in the short term. There’s an old joke in trading circles: How do you make a million dollars trading currencies? Start with two million. The point is not that currencies don’t matter, but that large, concentrated bets on them can introduce unnecessary risk. Exposure should be intentional and measured.

So what actually happens when the dollar weakens? Three things:

Foreign investments can rise in value when translated back into dollars. Just as a weaker dollar makes international travel more expensive for Americans, it also boosts the dollar value of foreign stocks and bonds—assuming those investments are not currency hedged. For investors with international exposure, this currency effect can add to total returns.

Many U.S. companies benefit from dollar weakness. When the dollar falls, American goods and services become cheaper for foreign buyers. Companies that generate a significant portion of their revenue overseas—often large multinational firms—may see stronger sales and improved competitiveness abroad.

Commodities often receive a tailwind. Energy, metals and other natural resources are priced globally in dollars. When the dollar declines, commodity prices frequently rise in dollar terms, benefiting investors with exposure to natural resources, energy producers or commodity-linked strategies.

The bigger question, however, isn’t what the dollar has already done—it’s what happens next. Will the dollar continue to weaken? Will it rebound? Should investors increase exposure to dollar-sensitive assets or take profits?

There’s no single right answer. The forces that pressured the dollar lower may persist, but currency trends can reverse quickly. That’s why the goal isn’t perfect prediction—it’s understanding how currency exposure fits within the broader context of your portfolio.

Currency exposure typically shows up through unhedged international stocks or bonds and natural-resource investments, each carrying its own risks and return drivers beyond currency movements alone.