The U.S. dollar has appreciated significantly, now at a 12
year high against the euro and an 8 year high against the yen. This is deemed mostly as a result of
the U.S.’s superior emergence out of the recession compared to most of the
world. People planning to travel
internationally or purchase foreign produced goods in the near future welcome
the news, since foreign goods become relatively cheaper when the dollar appreciates. However, investors have a different
reaction. Companies who rely on
sales in international markets will experience poor currency translation, which
will hurt their overall revenue. Investors
are expecting the companies to present weak quarterly reports because of this,
and are selling their stocks now. Also,
American companies, such as Ford for example, will find it tough to compete
with foreign manufacturers, since their cars are now relatively expensive due
to the appreciation of the dollar.
Is this good news, or do the negatives outweigh the positives?
http://money.cnn.com/2015/03/10/investing/strong-dollar-pros-cons/index.html?iid=HP_LN
7 comments:
This is good news for America. American now can travel abroad cheaper since the currency conversion is in dollars' favor. The bad news is that american products will have a harder time to compete in the international market as well as domestics one. However, American are really patriotic and american made products are highly desired overseas, at least in Asia as i experience; thus, the appreciation of dollars should not be much of an obstacle.
Yes, the travel expenses being cheaper is nice, but I think buying and selling in the international markets is more important. The dollars appreciation is not helping the U.S. with its trade deficit, its only making it worse because we would rather import goods and aren't exporting any due to loss of money on goods.
I agree with Courtney. While it is great that we are able to import lots of goods, we still need to be able to export things to other countries in order to reduce the trade deficit.
Wouldn't people buy more of a good if it were cheaper? Therefore, can't the companies now make more or the same amount because they will be able to sell things more easily?
Also, with the GDP accounting for imports and exports it may not be in Americas favor to have disadvantage with exports even though inputs are becoming easier.
This development has been occurring for a few years now: in 2012, the USD to CAD exchange rate was virtually at parity, as with the AUD. Now, both currencies are sitting around 0.75 to 1 USD. While this will likely make investment abroad appetizing, this will, as noted, create problems for the U.S. export market at precisely the moment it doesn't need it (during a shaky recovery). It will be interesting to see how major manufacturers handle the appreciation of the dollar on international markets; I suspect that we will see strong revisions downward on quarterly estimates from prominent exporters.
Appreciation of US dollar is the price of mightiness. US has strong economy as a back of strong currency, which will result in appreciation. Since the trade deficit might hurt US GDP and export industry; some US industry like technology industry are still absolutely competitive in global market due to unbeatable creation but not low price.
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