By: Allan Wang
Due to the Federal Reserve’s interest rates, the US Dollar has achieved levels never seen before. This allows Americans to conduct very high value bargains with other countries especially on imported goods. Just this week, the dollar reached multi-decade highs in terms of trading value towards other currencies such as the Yen and Euro. Consumer prices have risen over 9.1%, meaning its value will only continue to rise.
Though prices continue to rise, the strong dollar is proof that the Fed’s anti-inflation campaign is working. Additionally, the war in Ukraine has weakened European currencies, which helps explain why the dollar is standing out. Currently, the British pound stands at 11% less than the USD, and the euro stands at 12% less. Adam Posen, the president of the Peterson Institute For International Economics says “The dollar, yuen, yuan and euro all moved in relatively small ranges for a very long time. This is the first time in decades where everybody’s down against the dollar.”
The stronger dollar has hurt many countries straining under a budget that depends on oil imports that are priced in dollars. Overall, the dollar’s value has increased by around 13%, showing how quickly the US recovered from the pandemic and adjusted.
However, it isn’t all good news for the US. Due to the dollar being so expensive, oversea traders aren’t willing to purchase goods when they see them listed under USD. Less sales leads to weaker stocks in an already dropping stock market. Microsoft, one of the largest software giants, has lost over $250 million in earnings due to the rising dollar. On average, companies earn about 30% of their revenue from oversea sales. This reduction in earnings could cause them to reduce spending in other areas, creating an economic slowdown which is what the Fed wants.