April 27, 2022
Lately, the dollar has been rising in strength internationally. What is meant by a “strong” dollar, is that Dollars are more expensive to purchase in other currencies, for example: Euros, Yen, or Pounds. Recently, the price, or the exchange rate, of Euros has dropped to less than 1.08 Dollars, from nearly $1.20 one year ago. Similarly, one Dollar is worth nearly 130 Yen, up from about 108. (1)
However, the strength of the dollar does not come out of nowhere. The situation in Ukraine and the slower action of European, Japanese, and British central banks on inflation set the stage for the dollar’s rise. As foreign markets become more uncertain, investors seek the relative safety of the U.S. Dollar, increasing its price. More money coming into the U.S. does make the Federal Reserve’s efforts to fight price increases more difficult. (1)
The positive: Americans will pay fewer dollars for imported goods. Purchasing online from foreign retailers or imported products may be cheaper than they were previously. You may find on your next vacation to Europe that your money goes a little further. (2) More importantly, a strong dollar can make energy imports, oil or natural gas, somewhat cheaper, potentially slowing the increases Americans have seen at the gas pump or in their heating bill. (1)
Contact me to learn more about how to put your dollars to work towards your short-term and long-term investment goals.