what does a strong weak dollar mean? how can I see if its strong or weak?
In: 150
A strong dollar means it’s worth more of <foreign currency>.
A weak dollar means it’s worth less of <foreign currency>.
Generally, strong dollars make imports cheaper because foreign companies are paying their expenses in a weaker currency, so those items can be cheaper in a country with a stronger currency. The opposite tends to happen with exports — if the dollar is strong, then items made in the US will cost a lot of Euros or Yuan in comparison.
And weak dollars invert all this. China is a manufacturing economy, so they much prefer a weak Yuan which helps them compete globally. They have historically worked to make the Yuan stay relatively weak.
To tell… loosely, look at charts of <local currency> to USD, Euro, and Chinese Yuan over reasonably long timespans. Google can give you this. If the lines are going up, your currency is strengthening. If the lines are going down, your currency is weakening.
Very generally, the USD has been getting stronger for over a decade. Euro/Yuan has been roughly holding even since 2015.
Some people try to trade currency — the concept is simple, but I have no idea about the details how how to predict what will come.
For a rando US guy, there are two takeaways
1. If the dollar is strong, foreign travel is cheaper, because I can get more Euros for my dollar, or whatever. If the dollar is weak, foregin travel is more expensive.
2. If the dollar strengthens, US stock markets tend to outperform world stock markets. And that’s what we’ve seen… Over the last decade, VTI (US market index fund) total return has been 11.2% per year, while VXUS (Non-US markets index fund) total return has been 4% per year. So iffff you can predict when the dollar will weaken, it might tell you when to go from a more US-centric portfolio to a more international one.
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