A weak greenback can fan inflation by raising the cost of the necessities of daily life. It also can curb your pleasures by making an overseas vacation ridiculously expensive. But as an investor, you can even the score by buying the stocks of U.S. exporters and multinationals. The sagging dollar makes those companies’ products cheaper to foreign buyers paying in their appreciated currencies, and it shows up in companies’ profits.

The dollar has declined sharply in the past five years—29% against the euro, 20% against a basket of trade-weighted currencies. Will it continue to weaken in the coming year? More important, is the benefit from the enfeebled dollar already baked into the stock prices of exporters and multinationals? That’s anybody’s guess. But investing in the stocks of exporters and multinationals is still a smart play, given the weakness in housing and anything connected with it in the domestic economy. “Even if the dollar weren’t falling,” says Ian Shepherdson, chief U.S. economist at High Frequency Economics, an economic research firm in Valhalla, N.Y., “I would be looking for companies with an international focus—and that’s just to get away from the consumer slowdown.”

Not all U.S. companies with a global focus benefit from the weak dollar. Some hedge currencies to avoid the gyrations of the foreign exchange market. Others manufacture many of their products abroad, so their costs are in euros or sterling or renminbi.

Investors who want to exploit the weak dollar should check out mutual funds that aim to do just that. Fidelity Export & Multinational Fund («www.businessweek.com»)has a year-to-date return through Dec. 14 of 13.5%, vs. a 3.5% return by the Standard & Poor’s 500-stock index. And those holding the fund for the past five years have enjoyed an even better return: a 15.3% average annually, vs. 11.6% for the S&P 500.

Victor Thay, who has managed the Fidelity fund since October, 2005, emphasizes that his investments are not based on currency forecasts. Instead, he takes a bottoms-up view of exporters and multinationals, focusing on operating cash flow and reinvestment rates. Thay seeks companies where earnings per share or free-cash flow can double over a seven-year period of time.

Fidelity’s Export & Multinational Fund is weighted heavily toward technology stocks, followed by financials and energy. “With a lot of technology companies, nearly a majority if not the majority of their revenues are coming from overseas,” says Thay. Indeed, one measure that stands out in the fund’s portfolio is the high proportion of company revenues coming from non-U.S. sources. Computer and printer giant Hewlett-Packard («www.businessweek.com»), one of the fund’s top holdings, earns roughly 65% of its sales outside the U.S. For Monsanto («www.businessweek.com»), the agricultural and chemical giant, the figure is 43.4%. GAINS IN HEALTH CARE

Big-cap technology giants aren’t the only companies benefiting from a weaker dollar. NCR («www.businessweek.com»), a midsize technology services company in Dayton, saw its revenues rise 12% in the third quarter. One-fourth of that gain came from a favorable currency tailwind. NCR is a leader in automatic teller machines. That segment of its business jumped 17% year-over-year because of strong demand in the Asia-Pacific market as well as in Europe, the Middle East, and Africa.

Health-care companies, too, get a boost from the weaker dollar and strong overseas demand. International revenues at $6.4 billion Becton Dickinson («www.businessweek.com»), a core holding of Fidelity Export & Multinational, came to 52.3% in 2007. That was an increase of 11% from a year earlier, reflecting a 5% favorable impact from translating revenues in strong foreign currencies into weaker dollars. For Allergan (

DETROIT: Carmakers expect 2008 to be challenging, at best, but hundreds of automotive parts suppliers are anticipating the year ahead to be one of the ugliest ever.

Overall sales in the United States are projected to fall below 16 million vehicles next year, the lowest level in a decade, as a housing slump, high oil prices and weak consumer confidence deter car shoppers. Slow sales will mean less demand for parts at a time when many suppliers are already suffering from years of heavy losses or eroding profit margins.

The outlook for suppliers, the largest manufacturing sector in the United States, worsened recently when Detroit automakers said that they did not plan to counter the softening market with bigger discounts, even if the country slipped into a recession.

Auto parts suppliers employed about 654,000 people in the United States in 2006, down from a peak of 840,000 at the beginning of this decade, according to the federal Bureau of Labor Statistics. That is still considerably larger than the American payrolls of automakers.

During the 2001 recession, huge sales and no-interest financing deals kept assembly lines humming for the automakers and suppliers.

But those incentives devastated carmakers profits and vehicles resale values, so General Motors, Ford Motor and Chrysler are trying to move away from that strategy.

“Whats going to be different about this time is that the automakers are signaling they wont continuously prop up sales,” said Erich Merkle, an analyst with the consulting firm IRN in Grand Rapids, Michigan. “Its not a sustainable climate going forward.”

Suppliers will probably feel more pressure as the automakers try to cope with declining sales by asking for price reductions on parts.

That would be on top of the price cuts that suppliers have already reluctantly agreed to, with the assumption that those prices could rebound when the market picks up. But that has not happened yet.

Investors have battered suppliers share prices as a result. Shares of ArvinMeritor, based in Troy, Michigan, and one of the largest parts makers in North America, fell below $10 this month for the first time in seven years, from a high of $23.65 in the summer.

TRW Automotive Holdings in Livonia, Michigan, set a 52-week low of $21.38 on Wednesday. Superior Industries International, based in California, and Stoneridge, based in Ohio, also set 52-week lows this week, while the Detroit-based American Axle and Manufacturing hit an 11-month low.

Shares of Lear, Tenneco and Magna International have also fallen sharply.

Last week, Jonathan Steinmetz, an automotive analyst with Morgan Stanley in New York, reduced his 2008 earnings estimates for every supplier that he covers and said there was potential for further deterioration.

“The cuts reflect recent production schedule changes at GM, Ford and Chrysler and the expectation of more to come,” Steinmetz wrote in a note to clients. “We emphasize companies with non-Detroit Three business, strong balance sheets, geographic diversification, reasonable valuation, and healthy dividend yields.”

Not all suppliers are facing a gloomy future. Some, including BorgWarner in Auburn Hills, Michigan, and Johnson Controls in Milwaukee, have continued to post sizable profits despite - and in some cases as a result of - the overall industry climate.

“There will actually be some suppliers that will benefit and do very well in 2008, because some of their competition is going away,” Merkle, the IRN analyst, said.

W. Patrick Dreisig, a lawyer with Butzel Long in Detroit who specializes in the automotive industry, said that the longer the supply industry remained in turmoil, the more the gulf between healthy and unhealthy suppliers would widen.

“The weaker suppliers can only lose money for so long before they need to file for some sort of protection,” Dreisig said. “The weaker suppliers are going to be acquired or go out of business and the stronger suppliers will get stronger.”

For many companies, he says, the goal is merely to remain open with the hope that the market will eventually improve.

“If they can just survive it until it stabilizes and then grow after that,” Dreisig said, “they may have achieved something very successful.”

For an obscure corner of the financial market, the bond guarantors have caused quite a stir this week.

On Thursday, shares of the biggest insurer of financial risk in the United States, MBIA, fell 26 percent after it disclosed that it was guaranteeing billions of dollars of the kind of complex debt that unnerved the credit market this summer. The move came a day after Standard Poors downgraded another bond insurer and assigned a negative outlook to four companies, including MBIA.

MBIAs disclosure, which came in a data table posted on its Web site late Wednesday without any explanation, highlights the crisis in confidence that has wracked the credit market. Investors, specialists say, are scared of what they do not know and no longer trust what they are told by the professionals who are supposed to know.

“You would like for all the bad news to get out there and have some assurance that all the bad news is out there,” said Hugh McGuirk, vice president and head of municipal investments at T. Rowe Price, the investment firm. “But we are continually being hit by another tape bomb.”

In recent days, attention has turned to bond insurers, which were created to guarantee municipal bonds and make it cheaper for cities, school districts and state governments to raise money. In the last 10 years, these companies have branched out from that niche to guarantee securities that are backed by mortgages and corporate debt. Critics say the expansion has been reckless and will lead to big losses.

MBIA, whose name once stood for Municipal Bond Insurance Association, has insured about $30.6 billion of complex securities known as collateralized debt obligations, or CDOs, which are holdings of bonds that are often backed by home mortgages. On Wednesday, the company disclosed that about $8.1 billion of the guarantees was for CDOs that own the bonds issued by other CDOs. These derivative securities are considered particularly risky and hard to value because they are at least twice removed from the assets and borrowers that underpin them.

“It questions my confidence about how upfront the company is being and has been,” Robert Haines, an analyst at the research firm CreditSights, said of MBIA. “Thats the asset class that everyone has been scrambling about.”

MBIAs credibility problems resonated in the stock market, where its shares fell $7.07, to $19.95. Also Thursday, Fitch Ratings, one of the three largest ratings agencies, said it was considering a downgrade of MBIAs AAA rating unless the company was able to raise another $1 billion in capital in addition to the $1 billion it raised this month from Warburg Pincus, the private equity firm. In a statement issued later in the day, the company said its disclosure provided more detail about its portfolio and that Warburg Pincus and the credit ratings agencies had been aware of the figures.

As of September, MBIA guaranteed $432.7 billion in municipal bonds and $240.3 billion in corporate and mortgage-related bonds.

On Wednesday, SP said its analysis showed MBIA could face losses of $3.2 billion because of the mortgage-related securities it has guaranteed, noting that the company has a “capital cushion” big enough to absorb losses of up to $1.8 billion. SP has assigned a negative outlook to the companys AAA rating, as has Moodys Investor Service.

The AAA rating is crucial to MBIA and the debt that it has insured because without it, the company cannot write insurance policies on bonds that have a lower rating than it does, a segment that makes up most of its business.

For investors in bonds guaranteed by MBIA, a downgrade could force them to acknowledge the falling value of their holdings right away.

Concern about such an outcome at another insurer - the ACA Capital subsidiary ACA Financial Guaranty, which lost its A rating from SP this week - persuaded investment banks to give the company an additional month to fix its financial woes before demanding that it put up collateral.

MBIA executives have long maintained that they have more than enough capital to meet losses. Furthermore, the company has argued that even the CDOs it has insured are not the toxic waste that critics like to imply and that those securities would have to suffer significant losses before the company would be obliged to pay claims.

When losses do finally arise, the company would make monthly payments to policyholders to compensate for the lost interest and principal payments.