Strategies
By JEFF SOMMER
United States Treasury secretaries routinely say that they favor a strong dollar, regardless of circumstances or economic conditions. And the dollar is strong right now, thanks in no small part to actions by foreign central banks.
The European Central Bank significantly loosened its monetary policy on Thursday, in the process driving down the euro and bolstering the dollar. Measured against a basket of currencies, the dollar’s value has soared 19 percent since May, and the momentum seems to be building.
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Bespoke Investment Group offered a good example of how two companies’ fortunes have diverged in the last year, as the dollar has strengthened. In 2008, Altria, the old Philip Morris tobacco group, divided in two, based mainly on revenue source: Altria’s revenue is generated in the United States; Philip Morris International’s revenue is generated abroad.
Since the dollar began to rise last year, Altria Group, the domestic company, has skyrocketed, while Philip Morris, the international company, has “flatlined,” Bespoke said in a report to clients.
All of which suggests that a strong dollar isn’t entirely and always good, whatever the Treasury secretary says. But it is something we will have to learn to live with.
A version of this article appears in print on January 25, 2015, on page BU3 of the New York edition with the headline: The Strong Dollar Is Always Good, Except When It Isn’t. Order Reprints| Today’s Paper|Subscribe
