Weak Dollar Makes Some Rejoice, Others Worry

The U.S. dollar has become considerably weakened over the last decade. A weak dollar is relative, to how it was valued in the past and to its position in the foreign exchange market. A new study shows how the weakened dollar is significant to today’s U.S. economy.

Study Shows Impacts of Weak Dollar on Today’s U.S. Economy

A new study released this week shows the impacts of a weak dollar on today’s U.S. economy. The study, sponsored by auditing and consulting firm KPMG, details how the U.S. has suddenly become a very competitively priced place for other countries to do business. The U.S. is third on the list of affordable countries to do business, after Mexico and Canada. This is a jump from two years ago, when the U.S. economy put America at number seven on the list. The study measures the costs of doing business in industrial countries including taxes, utilities, labor and real estate. (Tong, Vinnee. “Weak Dollar Making US a Business Bargain.” Associated Press 27 Mar. 2008.)

Today’s U.S. Economy Benefits from Weakened Dollar

Today’s U.S. economy can be positively impacted by the weak dollar. Tourism increases, as visitors from other countries enjoy cut-rate visits to the U.S. It’s more competitive for companies outside of America to do business in the U.S. It can also make it easier for America to sell goods and services to other countries. The weak dollar means that U.S.-based companies can potentially increase prices or at least, resist dropping them in order to be competitive. And companies that deal with foreign markets can enjoy an influx of new business. (Feiler, Keith. “Strong Dollar, Weak Dollar: Foreign Exchange Rates and the U.S. Economy.” Federal Reserve Bank of Chicago.)

Negative Impacts of a Weakened Dollar on the American Economy

There are a number of negative impacts of a weak dollar on the American economy.

Companies fret that a foreign takeover is imminent. Consumers also face higher prices in stores for foreign-made items. Expensive foreign products, like cars, can contribute to an overall higher cost of living. Oil prices have continued to rise to record highs, making daily commutes much more costly. And many people planning trips overseas will put vacations on hold until the dollar bounces back and travel abroad is more affordable.   

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