Having spent yesterday discussing the impact of the Fed's no taper policy on bonds, today we're showing its impact on the dollar. The announcement on Sept. 18 sent the Dollar Index (DXY) plunging 1.2 percent in less than two hours -- the largest one-day move in 11 weeks. By the end of the session, the DXY violated a two-year trend line which had provided support on four previous occasions.
What's the takeaway? Continue flooding the market with dollars and increased supply eventually rules the day. A weaker dollar may ruffle the feathers of the Treasury and Treasury buyers, such as the Chinese, but it has exporters high-fiving in the C-suite. When the dollar falls, U.S. products become cheaper to the rest of the world. Exporters theoretically sell more, or at the very least they repatriate profits at a more favorable exchange rate (both literally and on a mark-to-market basis, should they elect to hold the cash abroad).
This is no secret on Wall Street. Data provided by bespokeinvest.com show U.S. exporters have significantly outperformed since the dollar's peak on July 9:
In order to determine which U.S. companies could potentially benefit most from the falling dollar, we sorted the S&P 500 members by non-U.S. sales as a percent of total sales. Coke bottler Coca-Cola Enterprises and cigarette maker Philip Morris International share first place with 100 percent of sales occurring outside the U.S. Here are the top ten U.S. exporters:
For the benefit of blog readers, here are the next ten largest exporters in alphabetical order. Their respective non-U.S. sales as a percentage of total sales range from 81 percent to 72 percent: AES Corp. (AES), Aflac Inc. (AFL), Diamond Offshore Drilling Inc. (DO), Linear Tech Corp. (LLTC), LSI Corp. (LSI), Mead Johnson Nutrition Co. (MJN), Microchip Technonolgy Inc. (MCHP), Mondelez International Inc. (MDLZ), NVIDIA Corp. (NVDA), Western Digital Corp. (WDC).
And lest we forget the most important ticker for the end of the week, TGIF.