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Thursday 6 October 2016

Strong dollar, weak dollar - Consequences

The US dollar is often the standard by which other currencies are measured. A strong dollar means that the currency can buy more foreign products and services. This may be good for consumers and international travelers because they want to buy more (eg electronics) and the places they visit are cheaper.
The negative side is that US companies, which sell products and services to foreign customers, experience difficulties because the products and services cost more. This means that US producers doesn't have an advantage in the global market.
This could lead to relocation of US Business in other countries with lower costs, so that they remain competitive in the market. In other words, a strong dollar means job loss in America.
Weak dollar means that the currency buys less foreign products or services. Import prices jump. Consumers have to pay more for imports and foreign travelers may cancel their holidays because it is more expensive when the dollar is weak.
Weak dollar also means that exports become more competitive in the global market. Maybe maintaining or increasing jobs.

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