Weakening US Dollar poised to boost Apple's sales performance overseas

[kristine]

It no longer appears likely that Apple's overseas earnings can be repatriated back to the United States at more favorable tax rates this year, as plans for tax reform--including deep cuts to health care spending aimed at enabling a huge tax cut--have been delayed. On the other hand, unsettling political news is also having an adverse affect on the US dollar, creating an unanticipated side effect: a more favorable currency exchange environment for Apple's foreign earnings.

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American political chaos disrupting markets

Strong earnings in the winter quarter jolted Apple's stock price upward despite foreign currency headwinds. Apple shares continued to rise on apparent optimism that a new Republican president--backed by Republican control of both chambers of Congress--could quickly implement business-friendly tax breaks, including lower repatriation rates on Apple's very large overseas earnings.

However, that optimism turned out to be misplaced. Efforts to slash health care spending to enable very large tax breaks was met by popular resistance that fragmented the controlling political party, delaying the full passage of both health care cuts and subsequent efforts to shift tax policy.