When the US dollar gains ground against international currencies, Americans get a lot more bang for their buck when traveling abroad.
But for US investors who hold Asian, European or Latin American equities, a strengthening greenback reduces the US dollar value of these stocks and any dividends they pay.
At the same time, the euro’s decline means that Continental companies’ goods and services become more competitive in the US—one of the world’s most important import markets.
And a cheaper home currency makes income earned overseas worth more; for example, the dollars that a European company earns from its US operations or by exporting to goods to America have more value.
Rising sales and a more valuable US dollar translate into higher earnings to support dividend growth.