The Falling Value of the Dollar

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This is Steve Ember with the VOA Special English Economics

The falling value of the dollar has become a major story in
international finance. The value of a country's money is often
thought to show the strength of its economy. But experts say this is
not always the case. Changes in the value of currency help some
parts of the economy and hurt others.

When people go to foreign countries, they have direct experience
with the exchange rate of money. International travelers must use
their own money to buy the currency of the country they are
visiting. For example, Americans on holiday in a foreign country can
buy more currency when the dollar has a high exchange value.

So a high exchange value is good for vacationers. It is not so
good for exporting. A strong dollar means that American exports are
more costly. Other countries are less likely to import products from
the United States because they are too costly. American agricultural
goods, computers and airplanes all are more costly on the world
market when the dollar is strong.

However, sellers of foreign goods within the United States are
helped by a strong dollar. A strong dollar means that American
companies can buy more with the same amount of money. They can sell
goods at a low price in the United States and still make a profit.

This means that Americans can buy more. Low prices increase
demand for foreign goods in the United States. American companies
and individuals then continue to buy less costly foreign goods. This
helps to increase the American trade deficit.

A weak dollar helps American companies that do business overseas.
For example, the American computer industry gains because its
products are less costly to foreign buyers. Financial magazines
report that technology companies like Intel and Microsoft have
increased profits because of the weak dollar. Increased trade helps
reduce the American trade deficit.

The United States Commerce Department keeps information on
America's imports and exports. Information on the third quarter of
two-thousand-three shows that America's trade deficit did fall.
American exporters should gain the most from the falling dollar.
But, the affect of the weakening dollar on the United States trade
deficit remains to be seen.

This VOA Special English Economics Report was written by Mario
Ritter. This is Steve Ember.