The US dollar has been in relative decline since Covid first slammed the US in March 2020.
To help the halted economy, the Fed dropped its target rate from 1.25% to 0.25% and quickly cobbled together a $700B quantitative easing package. Congress then passed a $3T relief bill, spiking the deficit to a record peacetime high.
Economists agree these efforts helped avert an economic depression. Unintentionally these deeds also tamped the relative value of the dollar – not necessarily a negative outcome.
Like a double spritz of Chanel No 5, a dollar that’s too strong is not a good thing.
Yes, yes a strong dollar makes for a cheaper overseas holiday (remember those?).
Yet a too strong dollar also makes US exports less competitive in those same overseas markets.
On the other hand, a relatively cheaper dollar is a boon to US multinationals that sell products overseas – that is to say, many US companies. A devalued USD also makes foreign imports relatively more dear, helping boost domestic sales of US-made goods.
With the US economy staging its slow comeback, it really needs all the help it can get. And although perhaps counterintuitive, a somewhat weaker dollar could actually help make the US economy a bit stronger.
