Weak dollar provides windfall

NEW YORK – The slumping dollar has become a financial lifesaver for American companies whose overseas operations in many cases are growing faster than their domestic units. It also helps to explain why U.S. stocks have zoomed to records even as signs of an economic slowdown have multiplied.

Companies like Caterpillar, McDonald’s and General Electric reported first-quarter earnings this week that surprised most Wall Street analysts precisely because of better-than-expected results from Europe, Latin America and Asia.

The dollar fell on Friday to an all-time low against the euro, the currency used in Germany, France and 11 other European nations, and hasn’t plunged this far versus the pound since Margaret Thatcher’s second year as prime minister. That means profits earned in those nations become supercharged when they are converted to dollar equivalents for financial reporting purposes.

“What these companies are earning outside the U.S. is worth a lot more; it is like getting a free ride on the currency movement,” said Octavio Marenzi, chief executive of business consulting group Celent LLC. “For the time being, lots of corporations are looking much better than they’d otherwise look.”

Economic expansion outside the United States is more robust, while interest rates abroad are generally rising.