Strong Dollar Could Eat into Ford’s Stock Rally

The surge in the U.S. dollar this month to an almost seven-year high versus the yen is very bad news for Ford investors, if past history is any guide.

In the six months following a 5 percent or greater surge in the dollar-yen, Ford shares were negative almost 80 percent of the time with a median return of negative 9 percent, according to analysis by CNBC.com using Kensho, a quantitative analytics tool.

One could reason that when the dollar strengthens by this magnitude, it raises the relative prices of Ford vehicles in the international marketplace compared to Toyota and others.

However, somebody better tell those investors who have bid up Ford shares by almost 11 percent this month. Especially since the dollar-yen rally in November stands at greater than 7 percent and counting.

The dollar is surging amid signs of an improving labor market, a stronger economy and stable-to-rising consumer prices. Also, nothing in the Federal Reserve meeting minutes released Thursday indicated that the central bank would not be on a course to raise interest rates sometime next year.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza