Strong dollar and weak pound could make FTSE 100 companies an attractive prospect

28 June 2017

Investors could see opportunities arising from differing monetary policy on each side of the Atlantic, says investment firm Charles Stanley.

Charles Stanley highlights that the dollar’s relative strength against the falling pound – which in part has been caused by the Fed’s determination to increase interest rates, coupled with the Bank of England’s reluctance to increase rates - has created some attractive opportunities for those looking for returns on their investments.

In particular, the firm cites companies listed on the FTSE 100, an index of the biggest companies on the London Stock Exchange, that earn their revenues and pay dividends in dollars.

Here in the UK, interest rates are at rock bottom, and the Bank of England Governor has said “now isn’t the time” to change that - this is despite three members of the Monetary Policy Committee (MPC) voting for a rate rise in the last meeting.

However, across the pond, the US Federal Reserve, confident on the US economic outlook despite the election of a controversial president, is edging up interest rates.

“Lots of companies pay their dividends in dollars”

Gary White, chief markets commentator at Charles Stanley, says: “The strength of the dollar is really important. We think US interest rates are going to continue to rise in a steady fashion. A fashion which would support the FTSE 100 and particularly dollar earners in the FTSE 100.”

He explains: “If you want to invest in the UK, a strong dollar can actually boost your dividends. There a lot of companies that pay their dividends in dollars and these are not just the oil companies and commodity companies. They include companies such as AstraZeneca, HSBC and Standard Chartered.”

Moneywise doesn’t recommend taking on the risk of investing in individual shares unless you know what you’re doing – see How to invest in shares for more on this. But many of these companies can be found in popular funds. AstraZeneca and HSBC, for example, are among 10 companies found in more than a quarter of UK based equity funds.

For our pick of the best funds, see our First 50 Funds for beginners.

If you would like to learn more about where to get started with investing, also read our guide to the best investment platforms for beginners.


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