The value of the US dollar has been driven by the Federal Tax Reserves to its highest in several decades. A lot of currencies from Europe and Asia have weakened against the US dollar, and it is mainly because of the war in Ukraine, which upended the food and fuel markets. This impacted some European countries and other developing countries more than it did the US, which means that the US dollar is stronger. “The dollar, euro, yen and yuan moved in relatively small ranges for a very long time. This is the first time in decades where everybody’s down against the dollar,” said Adam Posen, president of the Peterson Institute for International Economics.
Still, the increase in value of the US dollar isn’t all good. Because it is becoming stronger, the prices of American products are also getting higher for customers in other countries. This hurts major exporters and also huge US corporations because they are losing money overseas. This further sinks the values of stocks for the major US corporations that are losing money. In general, US companies derive about 30% of their total earnings from overseas operations, and the earnings hit for the companies from the stronger dollar can cause US companies to reduce spending in other areas and contribute to the economic showdown that the Feds are planning.
The dollar’s performance is defying the earlier worries that the Biden administration’s use of financial sanctions is going to encourage other countries to reduce their reliance on the dollar. Instead, it still makes up 59% of the total central bank reserves. The dollar has contributed to the falling prices of imported goods. On Friday, the Labor Department reported that the price of imports, excluding fuel, dropped in June by 0.5 percent. “The strong dollar is helping curb inflationary pressures,” said Rhea Thomas, Senior Economist with Wilmington trust.
Link to article: https://s3.amazonaws.com/appforest_uf/f1658068884739x208824306044759200/Soaring%20dollar%20starting%20to%20help%20Fed%20in%20fight%20against%20inflation%20-%20The%20Washington%20Post.pdf
Still, the increase in value of the US dollar isn’t all good. Because it is becoming stronger, the prices of American products are also getting higher for customers in other countries. This hurts major exporters and also huge US corporations because they are losing money overseas. This further sinks the values of stocks for the major US corporations that are losing money. In general, US companies derive about 30% of their total earnings from overseas operations, and the earnings hit for the companies from the stronger dollar can cause US companies to reduce spending in other areas and contribute to the economic showdown that the Feds are planning.
The dollar’s performance is defying the earlier worries that the Biden administration’s use of financial sanctions is going to encourage other countries to reduce their reliance on the dollar. Instead, it still makes up 59% of the total central bank reserves. The dollar has contributed to the falling prices of imported goods. On Friday, the Labor Department reported that the price of imports, excluding fuel, dropped in June by 0.5 percent. “The strong dollar is helping curb inflationary pressures,” said Rhea Thomas, Senior Economist with Wilmington trust.
Link to article: https://s3.amazonaws.com/appforest_uf/f1658068884739x208824306044759200/Soaring%20dollar%20starting%20to%20help%20Fed%20in%20fight%20against%20inflation%20-%20The%20Washington%20Post.pdf
