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Weak Dollar

What is 'Weak Dollar'

A situation where the U.S. dollar's value is decreasing relative to one or a basket of foreign currencies. Essentially, a weak dollar means that a U.S. dollar can exchange for fewer amounts of foreign currency. The dollar may weaken due to changes in the interest rate and outlook on the U.S. economy's future.

Explaining 'Weak Dollar'

Depending on the type of transaction that a party is participating in, possessing a weak dollar is not necessarily a bad situation. For example, a weak dollar may be bad news for U.S. citizens wishing to vacation in foreign countries, but it could be good news for U.S. tourist attractions, as it also means that the U.S. would be more inviting as a destination for foreign vacationers.


Further Reading


China's exchange rate impasse and the weak US dollar
books.google.com [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …

Invested interests: the politics of national economic policies in a world of global financeInvested interests: the politics of national economic policies in a world of global finance
www.jstor.org [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …

Dollar value and stock returnsDollar value and stock returns
www.sciencedirect.com [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …

The age of monopoly-finance capitalThe age of monopoly-finance capital
search.proquest.com [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …

Food Price Volatility and Vulnerability in the Global South: considering the global economic contextFood Price Volatility and Vulnerability in the Global South: considering the global economic context
www.tandfonline.com [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …

Commodity prices, interest rates and the dollarCommodity prices, interest rates and the dollar
www.sciencedirect.com [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …

Reserve accumulation: Implications for global capital flows and financial marketsReserve accumulation: Implications for global capital flows and financial markets
papers.ssrn.com [PDF]
… saving deficiency, and overly loose domestic monetary policy leading to a weak dollar … McKinnon, Ronald (2007a)“US Current Account Deficits and the Dollar Standard's Sustainability: A … Hangover: Wage Stagnation and the Syndrome of the Ever-weaker Yen.” Singapore …



Q&A About Weak Dollar


Which type is calculated from USDX?

Price based.

Is it always bad news for a country to have a weak currency?

No, it depends on what type of transaction you're participating in. For example, if you're an American citizen traveling abroad, then having a weaker currency may be bad news for you because your money will go further in another country than it would at home. However, if you own an attraction in America that attracts foreign tourists, then having a weaker currency can be good news because more people will visit your attraction since they'll get more bang for their buck with their own currency.

What is the definition of currency strength?

Currency strength expresses the value of a currency.

What is a weak dollar?

A weak dollar means that the value of a U.S. dollar is decreasing relative to one or more foreign currencies.

How do changes in exchange rates affect businesses?

Businesses need to adjust prices accordingly depending on how much their products cost them versus how much they sell them for so that they don't lose money from exchange rate fluctuations. For example, if the price of oil goes up but the price of gas stays constant (or vice versa), then businesses selling either oil or gas would lose money from this change because consumers would buy less of these products due to high prices while demand wouldn't decrease as much as supply did due to lower prices elsewhere (i.e., other countries). This could also happen with other types of goods and services such as clothing and electronics which are imported into America from other countries; therefore, having higher costs here than there means that business owners must raise prices here or else risk losing profits by selling below production costs (which isn't sustainable over time). On the flip side though, if exchange rates were reversed so that Americans had cheaper access to foreign goods and services compared to domestic ones

How can you calculate currency strength?

You can calculate it using purchasing power parity (PPP) or interest rates.

Why does a weak dollar occur?

A weak dollar occurs when interest rates are low and the outlook on the economy's future is positive.

What are two types of currency strength calculations?

There are two types of currency strength calculations, fundamental based and price based.

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