There has been a great deal of debate over the past several weeks about the strength of the dollar. The dollar is an important currency not just for Americans, but around the world, as so many prices on goods and services are dependant on the value of the dollar. There is a growing movement aimed at replacing the dollar as the global standard and replacing it with a basket of currencies from various countries. The last few months have seen the dollar weakening against other currencies, adding to the urgency of the debate about using the dollar to value oil and other goods.

There is a general lack of understanding among many people about what it means to have a strong dollar or a weak dollar. There are benefits in both cases–a strong dollar isn’t good for everyone and a weak dollar is actually ideal for many stakeholders in the dollar. Here are some of the benefits of both a strong and a weak dollar.

Benefits of a Strong Dollar:

- Lower Prices for Imports: A strong dollar relative to other currencies means that the dollar has the power to purchase more goods and services that are made overseas. Companies in the US using foreign materials to make the things they sell can purchase those materials for less money, creating wider profit margins. Everything Americans buy from overseas gets cheaper when the dollar is stronger.

- Exchange Rates Traveling Abroad: Travelers are affected by the exchange rate directly as they turn their dollars into other foreign currencies. A stronger dollar will buy more Euros, Pesos, Yen, or other foreign currencies and allow a traveler to get more value for each dollar they spend. Anyone who travels for business or pleasure to foreign countries prefers to travel at a time when the dollar is strong relative to the local currency.

Benefits of a Weak Dollar:

- Stronger Exports: A weak dollar is great for American companies that sell goods overseas. As the world gets smaller and multinational companies expand in foreign countries, the revenues earned overseas become more and more important. McDonald’s, for example, gets more of their sales revenue from Europe now than they do from the US. The American goods that are bought overseas are paid for in foreign currencies, and a weak dollar means that foreign currencies can be turned into a larger amount of US dollars. The stock market is usually a beneficiary of a moderately weaker dollar and the economy as a whole depends on foreign exports to help fuel the growth of the US GDP.

Foreign Tourism: When foreigners have a stronger currency, they are more likely to come to the US and spend their foreign dollars here. This helps some areas of the country more than others, but any money flowing into the US from other countries is good for the American economy and foreign spending in the US will be a factor in the recovery from this recession.

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Tags: dollar, exports, imports, tourism

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