As noted previously, there has been a surge in the strength of the dollar as of late. According to the U.S. dollar index, the dollar's strength has risen 17% this year. This came after the Fed gradually raised the federal funds rate from around 0% to 3%. This has reduced the amount of borrowing and mitigated inflation to increase the purchasing power of the dollar. Comparatively, it is said that “the dollar is almost the strongest in two decades against the euro.” Overall, the dollar in its current state is strong, especially when compared to the past few years. Because of its newfound strength, it is important to analyze the impacts and potential outcomes.
The strength of the dollar impacts American consumers and investors. In terms of consumers, a stronger dollar means consumers will be better off, especially in foreign markets. More purchasing power means that a consumer will be able to purchase the same goods with less money than previously as each individual dollar is of greater value. So, in a foreign market where each dollar is worth more than each euro, an American could technically purchase the same product for less “money.” However, the upside is not as clear for investors. This is due to the fact that multinational corporations and corporations that rely on exports from the U.S. lose out when foreign currencies are weaker relative to the dollar, as they end up earning less money in dollars. https://read.yip.institute/strong-usd
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