General Motors Company (GM), Ford Motor Company (F), Toyota Motor Corporation (ADR) (TM), AFLAC Incorporated (AFL): Is a Strong Dollar Necessarily a Good Thing?

The advantage has American carmakers worried, but it doesn’t seem to be translating into increased sales for Toyota Motor Corporation (ADR) (NYSE:TM) yet. February saw just a 4.3% increase in sales from last year, while Ford Motor Company (NYSE:F) showed 9% gains, and GM increased 7%. Still, the currency gains likely haven’t had time yet to effect corporate policy for any of the companies. Toyota Motor Corporation (ADR) (NYSE:TM) recently raised its profit guidance for the fiscal year ending March 31 by about 10%, and it is likely that the 2013 will be a strong year as well.

Meanwhile, on the other side of the currency trade, AFLAC Incorporated (NYSE:AFL) is another American company that benefits from a weaker dollar, albeit for different reasons. The company is one of the largest supplemental insurers in the United States, but is the largest insurance company overall in Japan, where it gets about 70% of its sales. All those yen-based policies ultimately get converted back into dollars, and fewer of them when the dollar is strong. It’s therefore no coincidence that AFLAC Incorporated (NYSE:AFL)’s stock has fallen about 5% since the yen started falling, despite a strong showing from the rest of the S&P 500.

The Foolish bottom line
It’s important to keep aware of where the companies you invest in do business, and where their competitors are based. The consequences of currency fluctuations can be very complex, and a strong dollar isn’t necessarily a good thing, as it can force a company’s products to be more or less expensive, and thus more or less competitive. It can also cost international companies profits when they repatriate global revenues, giving them an incentive to keep that money abroad until the exchange rate improves.

The article Is a Strong Dollar Necessarily a Good Thing? originally appeared on Fool.com and is written by Jacob Roche.

Fool contributor Jacob Roche has no position in any stocks mentioned. The Motley Fool recommends Aflac, Ford, and General Motors. The Motley Fool owns shares of Ford.

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