1) Dollar Value Up = American Purchasing Power Abroad Up
The American dollar is worth more and will buy more foreign goods and services.
2) Dollar Value Down = American Purchasing Power Abroad Down
Since the value of the dollar is down it is worth less and will therefore purchase fewer foreign goods and services.
3) Dollar Value Up = Foreign Purchasing in the U.S. Down
When the dollar is too strong against foreign currencies, foreign businesses and nations will receive fewer dollars when exchanging their currency so they tend to purchase fewer U.S. goods and services.
4) Dollar Value Down = Foreign Purchasing in the U.S. Up
If the American dollar is weak, foreign businesses and nations will most likely purchase a greater amount of goods and services from US
Which is Better, A Strong Or Weak U.S. Dollar?
When the United States dollar is strong or increases in value against all
other currencies, the following situations will most likely occur.
PROS FOR A STRONG U.S. DOLLAR
1. It is cheaper for U.S. businesses to import from foreign countries because the dollar is strong so foreign goods and services will cost less. The US consumer will benefit from this since import prices on goods would go down.
2. It would be cheaper for U.S. citizens to travel abroad since the consumer would be getting more for their U.S. dollars. This usually makes things like food, hotels, and souvenirs cost less.
CONS AGAINST A STRONG U.S. DOLLAR
1. Foreign businesses are less likely to import from the United States because they can trade more goods for their money with a different country that has a currency weaker than the dollar.
2. The U.S. is less likely to export goods when the dollar is strong; thus,
foreign demand for goods will decrease. When this happens, it tends to hurt
American companies by reducing their international sales.
3. Generally, a foreign country will buy agricultural exports cheaper from
a country with a weaker currency exchange rate than the
U.S. dollar.
The result is that American farmers will develop a surplus of crops,
which may lead to lower prices. Getting less for what they produce is
a disadvantage to farmers.
4. The U.S. trade deficit increases since US are importing more than
exporting.
When the United States dollar is weak or decreases in value
against foreign currencies the following situations will probably occur.
PROS ASSOCIATED WITH A WEAK U.S. DOLLAR
1. When other currencies are strong, relative to the U.S. dollar, international firms will be able to purchase more products from the U.S. resulting in an increase in exports.
2. When US export more goods abroad, they need more people to produce these products, so US employment rate goes up.
3. When US export more than their import, the trade deficit decreases.
4. When US dollar is weak, other countries can purchase U.S. goods and services at a lower price. For that reason, goods like US agricultural products are in high demand and farmers can expect a rise on most grain and livestock prices.
5. A weak dollar attracts foreign investment into the U.S.; thus, US real estate, businesses, and other investments become good investments for international business owners.
CONS ASSOCIATED WITH A WEAK U.S. DOLLAR
1. When US dollar is weak it costs a lot for U.S. businesses to import goods. These costs are passed on to the consumer. When this happens, prices on goods tend to rise.
2. When the US citizen get less of a nation's currency for their dollar, it costs American tourists, business people, and students more money to travel abroad.
3. There will be less foreign investment in U.S.
Treasury bills used to finance U.S. government expenditures.
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