Today the US Dollar Index fell to a yearly low. What are the implications?
The dollar rises and falls based on the strength of the US economy-and the confidence investors have in it's future. With other economies in Asia and South America growing more rapidly and the outlook for the US economy slowing, the dollar has been weakening.
What does the dollar decline mean for US consumers, and what happens if the dollar keeps sliding?
Americans buy more stuff from other countries then we sell to them. The weaker dollar raises the net cost for a typical Americans shopping basket. Paying more each year for the same basket of goods is the text book definition of inflation. So a weak dollar could push US inflation higher and create another tax on the already overburdened consumer.
A weak currency also comes with an important trade benefit. It makes everything based on that currency much cheaper in the global market place. That tends to help American
companies sell more of their products around the world, which boosts the US economy. That, in turn, should help create more jobs. In theory, all that expanded economic activity should help re-strengthen the dollar. Thank you for reading.
The dollar rises and falls based on the strength of the US economy-and the confidence investors have in it's future. With other economies in Asia and South America growing more rapidly and the outlook for the US economy slowing, the dollar has been weakening.
What does the dollar decline mean for US consumers, and what happens if the dollar keeps sliding?
Americans buy more stuff from other countries then we sell to them. The weaker dollar raises the net cost for a typical Americans shopping basket. Paying more each year for the same basket of goods is the text book definition of inflation. So a weak dollar could push US inflation higher and create another tax on the already overburdened consumer.
A weak currency also comes with an important trade benefit. It makes everything based on that currency much cheaper in the global market place. That tends to help American
companies sell more of their products around the world, which boosts the US economy. That, in turn, should help create more jobs. In theory, all that expanded economic activity should help re-strengthen the dollar. Thank you for reading.
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