A Stronger Dollar’s Positive Effects on your Life
The US economy has seen its fair share of challenges all of which have directly or indirectly contributed to the strengthening of the US Dollar. The strength of the US dollar has continued to improve since the world made it through the great depression. According to the PowerShares DB US Dollar index ETF that measures the value of the dollar as compared to other foreign currencies, the dollar is up more than 17% in the last 12 months.
“The Strong dollar is likely to have a number of benefits for some and negatively impact others.” [Tweet this]
Let’s see the various benefits of a strong dollar to the average person as well as to the United States economy as a whole.
Living abroad is cheaper
If you live abroad, you will find that you have a higher purchasing power when the dollar is stronger. This is because the local prices in foreign countries are not influenced by the changes that happen in the US economy.
Therefore a strong dollar is likely to buy you more things abroad when converted to the local currency. This is also true of US citizens visiting other countries abroad. For instance as a US citizen visiting Europe when the US Dollar is stronger can mean a more comfortable vacation. This is because you will be able to afford a lot more than if you traveled at a time when the dollar was weaker.
Imports become cheaper
Goods imported to the United States will be cheaper if the manufacturer’s currency value falls in comparison to the dollar. The effect of a drop in the cost of imports is that there will be more disposable income in the pockets of ordinary Americans.
This is also good news for American companies that have to import their inputs and raw materials from other countries. They are likely to have a larger profit margin which is good news for everyone involved.
More Foreign Companies Doing Business in the US
A strong dollar means that foreign companies doing business in the US and their investors will make more profits. This is especially true if they have a lot of the Sales in the United States that can translate to larger sums in their home currency. Depending on the size of the company, what seems like a tiny appreciation in the dollar can result in incredible profits for the company.
It is also likely that a stronger dollar can affect the stock market in unprecedented ways. This means that it could affect how you conduct yourself as a trader since most currency pairs are often traded against the dollar. Most brokers also use the US dollar as their base trading currency pair which means that most of the benefits we have outlined above may very well apply to you.
Have you experienced effects of a strengthening dollar? Let us know in the comments section below.
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