Market Overview

How the Weak Dollar Could Create Jobs


Bloomberg reported Wednesday that ATV manufacturer Yamaha Motor Co. is expanding production of its vehicles in the United States. In the next two years, the Japanese company will move all of its production to the U.S. from Japan.

The move, which was initially announced in February, is unrelated to the recent natural disasters which have rocked the East Asian country.

On May 5th, The Boston Consulting Group released a report in which they predicted that the U.S. would experience a manufacturing renaissance over the next five years due, in part, to the decline in the value of the dollar against other currencies.

In BCG's press release, they cited the decisions made by Caterpillar (NYSE: CAT) and NCR Corp (NYSE: NCR) to expand their manufacturing operations in the United States.

As the value of the dollar declines relative to other currencies, the price of American made-products becomes more attractive—both to foreign consumers who can get the goods at bargain prices, and domestic producers who must shill out more money for imports.

Talk of a currency war has been ongoing for some time, as central banks around the world work to debase their currency and thereby increase manufacturing employment in their own nations.

If—as many economic commentators believe—the Federal Reserve will succeed in its continued goal of debasement, then American manufacturing may boom in the coming years. That is great for a nation presently suffering from an unemployment rate hovering around 9%.

Traders looking to play continued dollar weakness and American manufacturing strength might consider iShares Dow Jones US Industrials (NYSE: IYJ) and PowerShares DB USD Bearish Index (NYSE: UDN). IYJ may do well if the American manufacturing sector continues to grow, while UDN may be a consideration for traders looking to play dollar weakness.

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