european stocks and the dollar

[mathjak107]

how does a stock react to changes in the dollar say like siemens . siemens is a german company which trades on many european exchanges as well as the german one. . the company is priced in euro's over seas . the company is also listed here on the nyse exchange and trades in dollars.

im a lil confused exactly where a strong or weak dollar plays in the pricing of the stock on the nyse. is it based on the company back in germany and the relationship of the deutch mark, is it the relation of the euro or is it none of the above and trades like an american company with no currency valuation factored in..

 

[fluffy]

My understanding...

If you buy Siemens ADR (ticker: SI) on an American exchange at the time when the exchange rate is, say, 1 euro = 1.20 dollars, and then dollar weakens 10% to 1 euro = 1.32 dollars, then assuming Siemens's price stayed constant in terms of the euro, it will be worth 10% more in dollar terms.

So, to put it simply, foreign stocks appreciate in terms of dollar when the dollar weakens and depreciate in terms of dollar when dollar strengthens.

Of course it should also be said that a big move in dollar weakness or strength is likely to affect foreign companies in less direct ways, especially if a big chunk of their revenues comes from trade with US.

 

[mathjak107]

thanks. i had a feeling thats how it played out but then 2nd guessed myself and wasnt sure.