Dollar sags but stocks prices rise

NEW YORK – You might be having second thoughts about that European vacation because of the weak dollar, but Wall Street doesn’t think it’s such a bad thing – at least not for now.

The dollar has lost more than 30 percent of its value against the euro over the last three years, and recently dipped to new lows. It has recovered somewhat from several weeks of selling, and was trading at $1.32 against the euro late Friday, but still remains quite weak; analysts say the downward drift is likely to continue in 2005.

Believe it or not, that’s good news for many U.S. stocks. While a sharp drop in currency valuations could jeopardize the financial markets by pushing interest rates higher and stock prices lower, the dollar’s gradual decline has had mostly positive effects, said Lynn Reaser, chief economist with Banc of America Capital Management. It’s made U.S. exports more competitive on the global market and slowed domestic demand for imports. That, combined with a slow rise in interest rates, should help level off the nation’s current account deficits, she said.

Stocks that stand to make the most gains from a feeble dollar include the major exporters, such as manufacturers and agricultural producers, as well as U.S.-based companies with sizable overseas operations.