How does the price of the dollar affect the economy of foreign countries?
In: Economics
If the price of the dollar (exchange rate) is low, it means that countries with a different currency can buy the same US products for less money. Example: company A sells 100 products for 100 USD to a foreign company B. Now the exchange rate falls and 100 products now cost 95 dollars. This might look not great for company A, but now company C would also like the cheaper products. Therefore a lower exchange rate makes US products more compatible with foreign products. US firms will probably have more orders and exports.
This is one reason why Germany is fairly interested in keeping the Euro low, since it “boosts” exports. (Not the best for the Euro area as a whole, since most countries import a lot)
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