Strong or Weak Dollar Is Better?

Making an absolute decision whether a stronger U.S. dollar is good or bad is tough call. I will have to agree with you that it can be good and bad for the U.S. economy. A stronger U.S. dollar would definitely enable U.S. citizens to purchase more of both domestic and imported products. You brought up valid point about the unaffordability of U.S. exports for other countries if the U.S. has a stronger dollar. Another factor to also consider is the possibility of a stronger US dollar having a negative effect on employment for those who work in export related industries. If other countries can't afford the products we make, our workers will be let go from their jobs. Now in a society without jobs, the US takes on the burden of more citizens unemployed.

dollar was close to an eight year shortage against the real, having lost more than 33% of its value during 2009 alone. During the past 12 month era, the exchange rate of the U.S. dollar (USD) has diverse from a low of BRL R $1.5310 to in height of BRL $1.7790. During 2010, the United States dollar typically kept an everyday exchange rate between (BRL) R$1.70 and (BRL) R$1.80, occasionally reducing below the (BRL) R$1.70 level.

4. Explain the meaning of “strong” currency and “weak” currency. What are the advantages and disadvantages of each?

The US dollar is used in the majority of the international transactions and therefore that happens to the American economy, will influence the international financial resources. Dollars bring big consequences both for the USA and for other countries. The economy of many countries depends on currency dollar. The increase in its course reduces the volume of the income in dollars for the country. And change of US dollar more considerably, than change of an exchange rate of the country. On the

Before we look at these forces, we should sketch out how exchange rate movements affect a nation 's trading relationships with other nations. A higher currency makes a country 's exports more expensive and imports cheaper in foreign markets; a lower currency makes a country 's exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country 's balance of trade, while a lower exchange rate would increase it.

The U.S. dollar peaked in value in 2000-2001 and has been in a significant decline ever since. There was a relatively brief period in 2008 when the dollar rebounded quite sharply due to the worldwide financial crisis and economic meltdown, when there was a global rush to the safety of U.S. treasury securities. But since then, the dollar has resumed its long-term downtrend. In the recent years the dollar has been improving relative to other currencies, becausee of the decline in those other currencies.

Exchange rates fluctuate in response to a multitude of factors. Upswings and downswings in the exchange rate can have both positive and negative consequential effects. Depreciation drops the value of the dollar and permits owners of foreign currencies to purchase a greater amount of Australian goods. Hence, depreciation makes Australian exports cheaper and accordingly

I hope you have enjoyed this simple explanation of international trade and foreign exchange rates as it pertains to the current U.S. macro economy.

We also need to take into consideration that by injecting more money to the economy, it will decrease the exchange rate and as a result it will depreciate the U.S. dollar.

3) Purchasing power parity and the exchange rate in the long run (how exchange rate is

The financial crisis of 2008 has been described as the worst financial crisis the world has seen since the great depression, but there are now murmurings of the potential for an even greater financial crisis, a currency crisis, caused by the demise of the US Dollar. The Dollar has been the reserve currency of the world since it took over from the Pound at the end of world war two, but we examine if it is about to crash spectacularly?

In the similar time period Japanese Yen has been in the third position with a turnover position of 20.8% in the year 2005. The overall financial market currency structure has seen a decline in the turnover position of the US Dollar to 85% from a strong position of 88%. Similarly a decline has been in the position of the Japanese Yen to 17.2% from an acceptable turnover position of 20.8%. While considering the trend of these two currencies during the period starting from 2007 and ending at 2010, it is to be noted that minute changes were seen in the two different currencies with regards to their share in foreign currency market. The US Dollar witnessed a continued fall to 84.9% from its previous 85.6% however, the Japanese Yen saw a rise from its previous position of 17.2% to an increase of1.8% that is 19%. During the same time period the US dollar and Japanese Yen were the second most traded paired currencies and was traded at around 14% of the overall foreign currency market second to the US Dollar and Euro pair. Conclusion The foreign exchange market has seen considerable changes owing to the global financial crisis. It is to be seen how different factors like economy and global politics further impact strong currencies like the US Dollar and other competing currencies such as the Japanese Yen.

There are many reasons why the dollar would fluctuate. The strength and weakness of a dollar depends on a number of factors such as inflation and trade deficits. To save the economy from inflation, the Federal Reserve will increase interest rates causing the economy to slow and the value of the dollar to decrease. Trade deficits can also devalue the US dollar. Although the high trade deficit is causing the dollar to fluctuate, the deficit could be a way to make the dollar stronger. Because we are borrowing from other countries, with our interest rates being higher, they would want to buy the US dollar to invest in the interest rate market.

Having exports increase, however, would cause America’s imports to decrease. This would make it harder on international firms that have production occurring in China and other places around the world. A lot of Americans would believe this to be a good thing, as it would reduce job migration overseas. On the other hand, I see this as hurting the established American companies that rely on overseas production. If the United States did not have much production occurring overseas, then a weaker dollar would increase exports without as much of a detriment to the imports needed by corporations. With the increasing international trading of firms, revaluing currency would cause them to have to reevaluate their strategies and accommodate a more valuable Yuan. In the meantime, they would lose profits until their new strategies could be implemented.

Textbook theory says a country 's currency should be allowed to appreciate when world markets for its export commodity are strong, and to depreciate when they are weak.