May 16th, 2010
Can’t Win? What the Exchange Rate Fluctutation Tells Us
Over time, the US dollar has lost ground against all kinds of foreign currency. I remember when I was a teenager the Japanese exchange rate was 200 yen for a U.S. buck; now it’s a lot closer to 100 yen to a dollar.
There’s been a lot of talk from the U.S. government for years about how a strong dollar was something that they liked, yet the dollar tended to become more and more devalued versus the yen, Euro, and all kinds of other currencies, often to the chagrin of those Americans who followed it.
Yet in the past few weeks, with the financial crisis in Greece, the Euro has slipped versus the dollar, and many are up in arms about that situation–the exact situation that many were wanting for years.
When the US dollar does well versus other currencies, it means good we import are less expensive for us, but goods we export are more expensive for those countries; on the other hand, when the opposite happens–other currencies doing better versus the dollar–it means goods we export are less expensive for those countries and goods we import are more expensive for us.
When are goods are more expensive for other countries, we’re less likely to have an influx of cash from those countries, and in many ways, we need that, considering, for example, we already export a lot of greenbacks to other countries who don’t really care for us due to three letters: oil.
So it’s a tough situation to be in. It’s hard to win, one way or another.
[...] A few posts ago I discussed how that some of the same folks who were complaining about the dollar going south versus the Euro were freaked out when the Euro weakened dramatically. I wanted to add a bit to that–that there’s an upside to what are often seen as financial difficulties, if you’re in position to take advantage of them. [...]