Weak dollar could boost earnings of US multinationals — Morgan Stanley

According to Morgan Stanley, the recent weakening of the US dollar may benefit American multinational corporations, which typically gain from favorable currency conversion effects when foreign earnings are translated back into dollars. Companies in the tech, industrial, and commodities sectors are poised to benefit the most, the bank reports. Examples include Microsoft, ExxonMobil, and Mastercard.

The current forex market dynamics could influence corporate hedging strategies, Morgan Stanley notes. As the dollar weakens, demand for it is likely to decline, further exacerbating the US currency’s depreciation.

The bank’s analysts also highlight potential structural shifts. A weaker dollar may reduce the US weighting in global bond and equity indices, potentially leading to lower passive capital inflows into American assets.

Meanwhile, the Federal Reserve (Fed) is unlikely to alter its cautious monetary policy stance solely due to dollar weakness. However, Morgan Stanley analysts suggest the central bank may gradually adopt a more dovish tone in the current environment.