The shrinking dollar

In the Alice-through-the-rabbit-hole world of finance and investing, things aren’t always what they seem.

The U.S. dollar touched a one-year low compared to the euro Tuesday – making the European coin worth more than $1.48.

For many here in the states, that’s cause for celebration.

It’s also counter-intuitive. Wouldn’t we want our economy’s currency to always outvalue that of other nations?

Not if we’re sending goods to those other countries, or trying to lure their tourists and business investment here.

Here’s a primer from the Federal Reserve Bank of Chicago.

Even if you don’t cover Disneyworld or Las Vegas, or live in a state that’s trying to woo a foreign factory, you definitely can find some local industry – agriculture, manufacturing, pharmaceuticals, tourism, IT – that exports products or commodities and otherwise ebbs and flows with the fate of the greenback.

On the flip side, consumers planning to travel overseas – or send their children as foreign exchange students – really suffer when the dollar is weak. With the school year just underway, the plight of study-abroad programs would make a great personal finance piece.

Overseas interest in commercial and residential property is a story that’s ripe for the plucking in just about any market.

In 2008, an extremely weak dollar fostered news reports that overseas car makers like Volkswagen AG and BMW to build or expand U.S. factories, and to source more car parts here, to take advantage of the amped-up purchasing power.

Houses, cottages and vacation condos are more attractive to foreign buyers when the dollar is weak – a 2008 report by the National Association of Realtors claimed that 26 percent of its members had served an international client in the previous year.

Search for a Realtor with the NAR’s Certified International Property Specialist in your state or zip code and ask some of them about overseas interest in your region.

When it comes to the markets, our dollar tends to zig when other investments zag, and vice versa. That’s because traders use the U.S. greenback as a safe haven, much as we store cash in a piggy bank. When other investments –stocks, commodities, overseas currencies – start to appear worth the risk, the piggy bank is lightened in favor of those other buys.
Here’s a Radio Free Europe article that puts demand for the dollar in perspective.

Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.