The strong dollar isn’t good

By Scott Tindle via   Article

The Strong Dollar Isn’t Good For All American Companies

“What’s going on here?

For four decades, the value of US imports have exceeded that of their exports. But data yesterday showed that its so-called ‘trade deficit’ – meaning the gap between imports and exports – was even greater than expected. This is indicative of how bad the environment is for US companies that primarily sell their goods abroad.

What does this mean?

The US dollar has risen about 20% in the past year versus the currencies of its main trading partners. This makes it more expensive for international companies to buy US goods and services but also cheaper for American companies to buy goods and services from abroad. ‘Exports’ are positive for American economic growth (because money is coming into America) while ‘imports’ are a negative (because money is leaving America).

Why should I care?

  1. A strong US dollar makes it more difficult for companies that sell their goods internationally. With the US Federal Reserve expected to raise interest rates soon, it appears that the US dollar could go even higher from here – which would weigh on the stock prices of exporters.
  2. For companies that import goods and sell them to American consumers, it is good news. Retailers such as Target, Macy’s and Kohl’s are good examples of such companies because they buy goods abroad (in foreign currencies) and sell them in the US (thus generating US dollar income).”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: