what does a strong weak dollar mean? how can I see if its strong or weak?
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>how can I see if its strong or weak
You compare it to other currencies.
If the dollar is worth 2 euros, it’s strong.
If you only get 50(euro)cents for your dollar, it’s weak.
The easiest way to think of it is: If you went to another country on vacation would you feel rich or poor? Lets say a meal costs $20 dollars in the US and &20 dollarydoos in Australia. If you can exchange $10 for &20 then it feels like you are getting the meal at half price. If an Australian comes to the US then they have to exchange &40 for $20 and it feels like the meal costs twice as much. In those examples the dollar is strong, if you flipped it the dollar is weak
Not everyone uses dollars as their money. In England, they use the Pound instead of dollars. If you went to London, you would need to sell your dollars and buy pounds so that you could buy a stuffed Paddington Bear.
The number of pounds you get for each dollar changes all the time. Right now, each dollar gets you 0.81 pounds. If you would only get 0.70 pounds for each dollar, then the dollar is said to be weak. If you were to get 0.9 pounds, we say the dollar is strong.
The way you know if the dollar is strong or weak is to look at a chart that shows the relationship. Google USD to British Pound.
“Strong” means that you can exchange a given number of dollars for a larger amount of a foreign currency; “weak” means that you get less of that foreign currency when exchanging dollars.
A weak dollar is generally better for exports because the goods will tend to be sold more cheaply abroad (the US product will be cheaper than competing products).
I think there’s two meanings. One, a basket of goods comparison: how much the same things cost if you exchanged a certain amount. If you go to Mexico with US dollars and you can buy more cheeseburgers, cars and houses (when you exchange those dollars for pesos) than you can in the US with your dollars, then the US dollar is strong compared to the peso. But also, strong/weak refers to how a currency has changed over time. If a currency has gained in value over the last six months, then people may refer to it as “strong” referring to its recent change rather than comparing to a basket of stuff.
The dollar is strong or weak against other currencies, and other currencies are also strong or weak against other currencies. Currency is exchanged on an open market, kind of like stocks, and so the relative values are constantly in flux. Strong means your currency buys more foreign currency, weak means it buys less foreign currency. Then we get into real exchange rates and things get more complicated, but that’s the basic idea.
So you would think having a strong dollar is always good and a weak dollar is always bad, because strong is good and weak is weak. Not necessarily.
The strength of the dollar comes into play when you’re buying from or selling to a foreign market. When you sell to a foreign market, you pay all your costs (salaries for your workers, etc.) in your home currency and make all your revenue in the foreign currency. If you have a weak currency, like China, you can use this to your advantage: all your costs are in cheap yuan and all your revenues are in expensive dollars, so you can sell your products relatively cheap and still make a tidy profit. This is one reason U.S. businesses can have a hard time competing against Chinese imports.
Meanwhile, if you have a very strong currency, like Japan, you’re paying all your costs in expensive yen and taking in your revenues in less valuable dollars, eating into your profits. This is why you see Japanese auto manufacturers starting to open plants in the U.S. for the U.S. market; not only is shipping less expensive but they are getting hammered on the exchange rate.
With global supply chains meaning you’re buying parts from one country to make it in another country to sell it to a third country, you don’t necessarily want super weak currency either. If you ask 10 economists what the ideal currency exchange rate is you’ll likely get 12 answers. So while the idea is rather simple, the application can get complex.
Strong means it is more valuable compared to other countries’ currencies. The easiest way to see is to look at a chart of the DXY. If it is over 95-100, it is generally considered strong.
https://finance.yahoo.com/quote/DX-Y.NYB.
There is an index called the U.S. Dollar Currency Index. The ticker symbol is DXY. If the index is over 100 the dollar is getting stronger, if it’s under 100 the dollar is getting weaker.
A strong dollar is good for American consumers because it makes it cheaper to travel abroad and to buy imported goods. But it is bad for businesses that export because their products are more expensive in foreign markets.
A weak dollar is bad for American consumers because it makes the foreign products we buy more expensive and makes traveling in foreign countries more expensive. But it is good for exporters because their products cost less in foreign markets.
We typically have inflation in this country and over time that weakens the value of the dollar. 100 years ago you might have been able to buy a loaf of bread for, I don’t know, 5 cents, and now it costs $2. That is the weakening dollar. As long as there is inflation in the long term the dollar will be worth less and less.
Talking about the strong dollar is usually in regards to other currencies today. You could go to say Africa and your dollar would buy a lot more than you can here in the U.S. since our currency is strong relative to theirs.
Long term though all currencies are declining in value as long as there is inflation. So the Euro of today will not buy as much as a Euro 100 years from now.
It basically means the U.S. dollar is strong against the Euro and the Pound but weak against American milk and eggs.
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