A Weaker Dollar

My dollar is strong. Does that mean it can beat up the yen or the pound? In a sense, yes. A strong currency is currency that has favorable exchange rates. In other words, the strong currency has more value abroad than domestically. A luxurious Spanish hotel and spa might be worth quite a sum of money, but with US dollars, it might be equivalent to the cost of a movie ticket (which could still be considered expensive at certain theaters). Of course, this value isn’t solely relevant to vacationers; the strength of a currency is significant in regards to international trade.

By definition, countries with strong currencies find it harder to export. Because a currency like the dollar has so much value, any price for a good is naturally higher in comparison to a weaker currency; in other words, a bad deal. Perhaps the contrast is easier to understand. Weaker countries, like China, have currencies that are literally worth less. Thus, they are willing to take lower prices for their goods because even with a lower price, the profit is enough to sustain them. These countries can still function, because the real costs of their goods and labor are lower.

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