[Voice of Bankrate.com reporter, Kristin Arnold talking]
Intro: The value of a dollar, whether strong or weak, has both positive and negative effects on the overall economy - which impacts consumers in multiple ways and changes the patterns of how we spend, where we go and how we invest.
The strength or weakness of the dollar can be affected by many factors, including inflation, interest rates, our economy's strength and stability versus that of other countries, and whether our government is running a deficit or surplus.
Certain segments of the economy are hurt and helped by both.
Weak dollar advantages/disadvantages:
A weak dollar isn't all doom and gloom. In fact, it can help the U.S. export business by making our goods cheaper and more attractive to international markets. The more products exported can result in better business ... possibly boosting the economy. However, when the dollar is weak, the relative price of global commodities goes up - which impacts consumer prices for food and energy…such as gasoline. It becomes more expensive for U.S. manufacturers to produce anything.
A weak dollar means it costs more to travel overseas and imports become more expensive. Those poor exchange rates benefits foreign tourists, boosting their purchasing power here in the U.S.
SOT: Greg McBride, Senior Financial Analyst, Bankrate.com
("The dollar's value plays a huge role in our investments, as well. A weak dollar can boosts returns on many or our international investments when they're converted back to dollars, but a strong dollar can be a drag on the returns earned on foreign stocks and bonds.")
Strong dollar advantages/disadvantages:
A strong dollar gives consumers more purchasing power. Your money goes further - not only domestically, but also globally. Exchange rates are better ... making foreign travel more affordable. A strong dollar is especially important for consumers as America tends to import far more goods and services than it exports.
While the cheaper foreign goods are good for consumers, that strong dollar hurts U.S. exports.
SOT: ("The strength of weakness of the U.S. dollar has a pocketbook effect on American households, impacting everything from the cost of food, gasoline, and other imported goods to the health of companies, cost of foreign travel and return on investments.")
Tag: To see how the dollar currently stacks up against other currencies, visit our currency conversion calculator under the calculator tab at Bankrate.com. I'm Kristin Arnold.