Nov 19 2007
Falling Dollar Explained by AP
The Associated Press has a good Q&A-style story about who wins and who loses thanks to the falling dollar. A piece of this instructive story is excerpted below:
Q: Does anybody win from the weaker dollar?
A: American manufacturers and farmers are enjoying a surge in export sales to record levels as the weaker dollar makes their goods cheaper and thus more competitive abroad. The export boom is helping to lower the U.S. trade deficit this year following five straight years of record highs.
The growth in exports is helping cushion the economic impact from the steep slump in housing, adding nearly a full percentage point to growth in the most recent quarter. Without the export boom, many economists believe the country would be in much greater danger of falling into a recession from the combined blows of the housing slump, the credit crunch and soaring energy bills.
The falling dollar affects venture capitalists and other U.S. based investors putting money to work overseas. VCs that raise their funds in U.S. dollars and then invest in China, India, Europe, Israel and other places can expect to pay more for their deals than they would for equivalent deals in the U.S. (China is a bit of an exception, since its currency is linked to the U.S. Dollar). The falling dollar should put a tamper on venture investment outside of the U.S.
2 Responses to “Falling Dollar Explained by AP”
Leave a Reply
You must be logged in to post a comment.
[…] no secret in what’s driving the Starbucks slide: the falling dollar. The coffee business is commodity based: it’s major input is coffee beans, which have to be […]
[…] been writing a lot recently on the effects of the falling dollar, its impact on earnings and what the Federal Reserve is likely to do because of […]