Some use it as a criticism of the political administration. Some see it as a portent of economic problems. Are any of these comments valid?

I have discussed before in this column that markets do not correlate with political power or administrations. Political policies can hinder economics. Seldom can they actually help. Be cautious of any assertion that a political policy has led to economic benefits.

In fact, the dollar has declined to a 15-month low against its rival currencies. That’s not all bad: The weaker dollar has helped power stocks to record highs and it helps American companies make money overseas. Some commentators assert that the difference between the stock market and the dollar are conflicting messages and are a portent of economic problems. Not likely. Actually a declining dollar has often been a benefit to companies, especially those which sell a lot overseas. Consider for a moment how Caterpillar enjoys a more competitive pricing position when it sells heavy equipment around the world.

Last November, some investors believed that a Republican-controlled Congress and White House would finally unleash the sluggish U.S. economy and force the Federal Reserve to raise interest rates more aggressively. Higher interest rates would increase the value of the dollar.

U.S. policies have not changed much while rejuvenated economic growth in Europe has boosted the euro. So the dollar has declined against many currencies recently. Is this decline a political comment or the aggregate of investors’ opinions about how economies and companies are likely to perform over the next year or so?

The U.S. economy is not the only player. The dollar index is heavily weighted toward the euro, which has rallied. The economic rebound in Europe and easing worries about the breakup of the eurozone lifted the euro to a two-and-a-half-year high against the dollar recently.

Simply put, there are positive and negative consequences of a weaker dollar. Context is important. Today it takes about $1.18 to buy one euro. Earlier this year it was $1.03. But in 2005 it was $1.27; in 2008 $1.51; in 2012 $1.30; and 2015 $1.13. The interesting question is “compared to what?” The dollar may have declined over the last few months but compared to a decade ago, it is much stronger.

Earlier this year, the dollar was so strong that it threatened to dent corporate profits. When the dollar is strong, products that are priced in dollars and sold overseas are more expensive for foreign customers. A strong dollar also hurts when foreign profits are converted back to the U.S. currency at a lower value. A dollar that is too strong would hinder exports. If the US wants to export more, a weaker dollar is a good situation.

Many large companies make lots of money overseas. That means they should enjoy more sales and higher profits thanks to the weaker dollar. For example, aircraft, software, mobile devices and credit card companies all derive about half of their income from outside the US.. In the same vein, companies which import supplies from overseas will face higher costs which could drive up their prices or reduce their profits.

If you have international investments, the dollar’s decline will improve your returns, which should make you smile. On the other hand, you might not like the fact that a European vacation will be more expensive. You will get fewer euros when you convert dollars.

As always, the economic and investment situation has many facets. Perhaps the weaker dollar indicates skepticism about the U.S. economy. In any case, be critical of commentators who seem to have an agenda.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at This email address is being protected from spambots. You need JavaScript enabled to view it..