The UK stock market is trading near record highs right now, but that doesn’t mean much to foreign investors since the plunge in the British pound has erased all their profits.
Yet market strategists are crediting the falling pound for the recent surge in UK stocks.
The FTSE 100 is up 11.3% from a year ago while the pound continues to trade near its 31-year low after having lost more than 17% of its value against the dollar since the beginning of the year, with most of the decline coming post-Brexit.
Strategists explain that companies with most of their money abroad have their earnings amplified when they are converted into a weakening currency, MarketWatch reports. That’s certainly the case in the UK, where FTSE companies make less than 30% of their revenue domestically. [MW]
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