Basic Beans

Strong Dollar and Weak Dollar


Jul.17.2013

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Strong dollar?


You probably hear this when you accidentally switch your TV channel to economic news. So what does it mean exactly? If you were to travel to Japan with dollars in your wallet, what can your strong dollar buy you there? What if the dollar is weak?

 

 

A strong dollar can be a blessing for US travelers (in case they decide to get out of their shell and visit the rest of the world, that is.) You can shop for more foreign goods for the same amount of money. When times are good, you can buy a Gucci bag with an additional wallet in Italy for the same price you would buy just one bag in the US.

But when the precious dollar is weak… You can’t really buy much with 1 dollar in France for example. 5 dollars are worth about 3.80 euros, which is not enough to buy a Big Mac in the Eurozone.

These were some of the advantages of a strong dollar. But is a strong dollar always good? Depends which angle you are looking at it. For example when the dollar is strengthening, U.S. firms find it harder to compete in foreign markets because they have to compete with lower priced foreign goods. Also, we will get fewer tourists in the U.S. because foreign travelers will find it expensive to travel here, which can affect the tourism industry. On the second thought, I'd actually like that, especially in New York. I can't even walk around Times Square without being stepped on!

In general, a strong/ weak currency can affect a country’s economy especially if it’s very dependent on export/import.

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