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As a result of improving US economy, continued problems in the Euro-zone and aggressive stimulation measures in Japan, the US dollar has appreciated against all major currencies this year. This morning the dollar again rose more than 3% agaist the yen, after the Bank of Japan announced an unprecedented easing program.

Year-to-date (as of close on April 3), the dollar is up 2.7% against the euro, 7.4% against the UK pound, 7.3% against the yen, 3.3% against the Swiss franc and 5.1% against South Korea Won.

Two notable exceptions are the Mexican peso and the Thai baht—both are up about 4.0% against the dollar this year.

Considering that S&P 500 companies derive more than 40% of their revenues from outside of the U.S., the strength in the US dollar will affect their first quarter results. Technology, materials and industrials companies are expected to suffer the most due to their high foreign exposure. 

Many large US companies talked about the impact of the strong dollar on their earrings during the last quarter conference calls.  

While a strong currency is generally good for any country, especially in the long-run, it hurts the domestic companies in the short run.

It appears that the dollar may continue to appreciate this year due to continued uncertainty in the Euro-zone, aggressive measures being taken by the Bank of Japan, and its status as the world’s key reserve currency.

Do you think that the strength in the Dollar will hurt US stocks?

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