Reply #3: A weak dollar makes American exports cheaper [View All]

[Jane Eyre]

A $1.00 item sold here is still $1.00, but its worth fluctuates with the worth of a dollar in an overseas currency. Thus if a dollar is worth only 80 cents in a foreign currency, then purchasing the $1.00 item in that foreign currency results in a 20% discount for the purchaser. Conversely, a stronger dollar means that foreign entities pay a premium for American goods. Importers of goods face the opposite scenario: a strong dollar means better prices for them in purchasing overseas goods, but a weak dollar makes American goods more competitive in the domestic market.

An executive of a large manufacturing firm here recently spoke to a group of businessmen praising the introduction of "a balanced dollar policy" by the Bush administration. The stronger the dollar, the harder it is for American manufacturers to compete in a global market and the easier it is for Americans to buy imported goods.