It’s been quite a commendable run for the U.S. dollar of late, particularly last week. The greenback hit a two-month high last week and the newfound strength is expected to help the currency finish the month higher.
The ICE U.S. Dollar Index, which is known for measuring the strength of the greenback against a basket of other currencies including the euro, British pound and Japanese yen to name a few, increased 0.4% on Sep 25, resulting in a 1.9% weekly rise and a gain of about 2.8% month to date.
In fact, it’s been a remarkable turnaround for the dollar, which had touched a more-than-two-year low. So, what’s behind the dollar’s comeback? Firstly, rise in global coronavirus infections is showing no signs of slowing down. New outbreaks of the deadly virus, especially in the Europe, have rattled investors. There were new reports of coronavirus cases in the U.K. and France last week. To make matters worse, new cases are on the rise in countries like Spain and The Netherlands. And this rise in infection may lead to tighter restrictions in Europe, which in all likelihood will hamper economic growth in the region and diminish chances of a V-shaped recovery.
Boris Johnson, U.K.’s Prime Minister, has already imposed restrictions on bars and restaurants in England, which many believe is a disaster for the economy. Market players are, thus, shunning European currencies and seeking refuge in safe-havens like the U.S. dollar. After all, prima facie, it seems the United States is handling the pandemic better than Europe.
But it’s just not the fresh outbreak of COVID-19 that forced traders to move out of European currencies to the dollar. The political uncertainty surrounding Brexit has also negatively impacted European currencies, especially the British pound. Anxieties are swelling that the United Kingdom will find it extremely difficult to strike a trade deal with the European Union ahead of the Brexit implementation period. And let’s admit, the Eurozone economy is not doing good either with its business growth screeching to a halt this month, further strengthening the greenback’s position compared to the euro.
But, is the United States in a better position? Alright, the Democrats and Republicans are in a slugfest in finding Supreme Court Justice Ruth Bader Ginsburg’s replacement and that could easily delay the additional stimulus measures, which is without a doubt the need of the hour. However, the Congress sooner or later will have no choice but to get the stimulus through to pep up the economy as they have always done in the past, while the Fed’s dovish outlook continues to provide the much-needed shot in the arm for the economy. All these, undoubtedly, bode well for the domestic economy and the greenback as well.
How to Play Dollar’s Recent Strength?
The dollar has not only strengthened in recent times but it seems there may be even more room for growth as well. So, which stocks stand to benefit from the strength in the greenback? U.S. companies that do majority of business oversees will have income denominated in foreign currencies. Now, when that foreign currency gets converted against a stronger dollar, the companies will receive less.
On the contrary, players with wider domestic revenue exposure will earn more because of a stronger dollar. Thus, investing in such companies for the time being seems prudent. We have, thus, selected five such companies that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
American Public Education, Inc. APEI is an online provider of higher education, primarily focused on serving the military and public service communities in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved 34.1% north over the past 60 days. The company’s expected earnings growth rate for the next year is 20.2%.
Bay Banks of Virginia, Inc. BAYK provides individual and commercial customers in Virginia, various banking products and services. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 29% north over the past 60 days. The company’s expected earnings growth rate for the next year is 37.5%.
Beazer Homes USA, Inc. BZH operates as a homebuilder in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 118.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 20.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cellectar Biosciences, Inc. CLRB, headquartered in Madison, WI, is developing agents to detect, treat and monitor a broad spectrum of cancer. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 16.8% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 54.6%.
Aqua Metals, Inc. AQMS engages in the recycling of lead, mainly in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 6.7% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 65%.
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