Tuesday, August 8, 2017

Disadvantages Caused Due To Weaker Dollars

By Alxa Roffel

Irrespective of whether you get involved in currency trading or not, the value of the US dollar does matter the most. Company's dong foreign sales definitely make a lot of money when the US dollar gets weaker, as the foreign exchange revenue increases, simply not because they are able to sell more goods, but simply because the earnings they will make after conversion will be larger. As the dollar gets weaker they do offer you with advantages but there are several disadvantages too.

The weakening of US dollar shows its immediate effect on the costs of foreign goods, as the costs increases rapidly. As there is a huge difference found in the trade deficit due to weaker dollar, the consumers in US are found to import more in comparison to what they export.

A country's debt also has equal impact on the value of the currency. It is important to consider the complexity of how the politicians are dealing with the debt problems of the country. It also is important to check if the politicians are responsible for the increase in the national debt of the country.

It also helps to increase foreign investments and there are different methods through which the foreign investments can help the US economy and to have a stable value of the currency or US dollar. Over the past few years, it is found that there are several foreigner buyers that have shown interest in the US real estate. Studies by NARs also suggest that every one of the five real estate agents sold a house to a foreign buyer.

Wars do have a major impact on the value of the currency. When there is a terrorist attack in a country, it does increase the chances of war in the country. When a country is in a state of war or shows potential for war the demand for its currency decreases.

This officially caused problems in the financial markets and thus the Federal had to make changes in the interest rates. In the current situation, inflation is not a very big problem. However, concerning the risks of inflation, Federal Reserve might consider lowering the interest rates more than it is actually needed.

As the US dollar gets weaker, the cost of travelling outdoor or foreign travel becomes very expensive. For an instance as the value of the US currency dropped at the beginning of the year the value of the Australian currency increased by ten per cent and simultaneously the cost of travelling to the country also increases. The increase in the cost of travelling is also visible when people travel to European countries too, although the change in rates is comparatively less in terms of percentage.

Once the value of the US dollar decreases it is likely to fall again and it can last for longer than people can actually expect. It is also found that the interest rate does play an important role in the increase and decrease in the direction of currencies. The weaker US dollar does have a major effect on the country's economy. However, the increase in the exports and foreign investment does help the US to give rise in the economy and thus allowing the value of the US dollar currency to rise again.

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