What Does a Falling Dollar Mean for Tech?

 
 
By Deb Perelman  |  Posted 2008-01-11 Print this article Print
 
 
 
 
 
 
 

A weak dollar may not be all bad news for the tech sector.

The value of the U.S. dollar has been sliding for more than 36 months, monitored dolefully by observers who recall the years when the dollar was the rock-solid underpinning of the global economy and are not used to the U.S currency's chronic weakness. 

Yet not all view the effects of the falling dollar as negative, especially within the tech sector. 

"A weak dollar can be good-technology is a big exporter, so this makes their products fare well in international markets," Carl Steidtmann, chief economist with Deloitte Research, told eWEEK. 

Some argue that any impact that the greenback's value has on the tech economy is a long way off, noting its diminishing role in international markets. 

"Goldman Sachs said earlier this week that we are in a recession and you didn't see tech stocks get hit. Sometime before the end of the year, you'll see more people in China on the Web than the U.S. What this is to say is: The world is not crying over the dollar," Rick Munnariz, senior analyst with The Motley Fool, told eWEEK. 

Prolonged effects of a low-valued U.S. currency, however, could be more significant. 

"Everything goes both ways. In the simplest terms, when the dollar goes down it's almost the inverse effect of what you have seen in the last few years. You bought the Made in China stuff because it was cheaper; well, America could be the manufacturer of low-cost products," said Munnariz. 

Nonetheless, few see this happening any time soon. Even with a softened value, the dollar is still a powerful currency, observers say. 

"I don't think that the falling dollar is going to have a dramatic effect... Yes, the value of the dollar is shrinking. The dollar is not going to strengthen any time soon if people continue to lose faith in what the U.S. is doing with its currency," said Munnariz. 

However, companies within the tech sector with broader overseas exposure have a lot in common with investors who believe in maintaining highly diversified investment portfolios, analysts say. These companies, they suggest, are likely to be in a better position to weather fluctuations in currency valuations. 

"That kind of highly diversified market portfolio does lend stability over the short term," Charles King, an analyst with Pund-IT Research, told eWEEK.  

"But the global marketplace is a double-edged sword. I think that while businesses are right to explore all parts of the marketplace, they're also exposing themselves to additional risks as well," said King.

 
 
 
 
 
 
 
 
 
 
 

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