dollar http://www.wisebread.com/taxonomy/term/7841/all en-US 8 World Currencies That Took a Hit in 2016 http://www.wisebread.com/8-world-currencies-that-took-a-hit-in-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-world-currencies-that-took-a-hit-in-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_currency_508410954.jpg" alt="World currencies that took a hit in 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's been a tough stretch recently for global currencies. Economic uncertainty, political shake-ups, and other world events have sent the value of currencies down sharply over the past year in many countries. Moreover, the decision of some nations to float their currency on the foreign exchange market has had troublesome results. Currencies in South America have been hit especially hard, but others in Europe and Africa haven't been immune to weakening.</p> <p>Here are eight currencies that dove in 2016.</p> <h2>1. British Pound</h2> <p>Thanks, Brexit! The UK's vote to leave the European Union stunned the world and sent the pound plunging over fear of the move's impact on the British and global economy. Right now, the British pound equals about $1.23 U.S., or nearly 20% less since June, 2016. The pound was worth $1.50 right before the Brexit vote. It dropped nearly 15% immediately and kept declining before rebounding slightly at the end of 2016.</p> <h2>2. Mexican Peso</h2> <p>In the spring of 2016, one U.S. dollar was worth about 17 pesos, but the value of the Mexican currency has been tumbling ever since. The anti-immigration and anti-trade message coming from Donald Trump during the presidential campaign led to a weakening of the peso, and Trump's election in November made matters worse. The dollar/peso trade is now above 21, marking a 23% decline in value for the peso.</p> <h2>3. Venezuelan Bolivar</h2> <p>The Venezuelan economy is a mess, with massive inflation, shortages of food and medicine, and general mismanagement. This has led to a collapse of the nation's currency, with the value dropping by more than 36% in late March of last year. But accurate data from Venezuela is so hard to come by that the actual value of currency is anyone's guess.</p> <h2>4. Argentine Peso</h2> <p>Argentina's currency began falling right at the start of 2016, then rebounded in the summer before enduring a long decline since. The U.S. dollar is now worth about 16 pesos. That means the value of the peso is down about 17% since this time in 2016. This drop is largely blamed on the decision to begin floating the currency on the foreign exchange market. The move was supposed to encourage foreign investment, but that has yet to bear out, and the currency has taken a hit as a result.</p> <h2>5. Turkish Lira</h2> <p>National security fears and inflation have hammered Turkey's currency, which hit a new all-time low in early January. The currency began tumbling last spring, and is now off more than 23% since a peak in April. Interest rate hikes in the U.S. have created additional pressure; it now takes about four lira to equal a U.S. dollar.</p> <h2>6. Egyptian Pound</h2> <p>Egypt's currency tumbled in October, after the nation's government announced it would free float its currency. The Egyptian pound's 45% loss in a single day is believed to be a record. The pound had been trading at an 8:1 ratio to the U.S. dollar, but now it takes 18 pounds to make a dollar. Observers say that in the long run, a weaker currency could boost exports and tourism, but there is concern about inflation in the short term.</p> <h2>7. Nigerian Naira</h2> <p>Nigeria also free-floated its currency in 2016 in an effort to lure investment, and results were not quite as bad as in Egypt. After being pegged to the dollar for more than a year, the naira dropped 30% in a day in June. One U.S. dollar is now worth about 315 naira, compared to 199 naira before the slide. To make matters worse, a decline in the value of oil has not helped the currency for this OPEC nation.</p> <h2>8. Euro</h2> <p>General concern about the European economy has depressed the value of the currency used by more than 330 million people on the continent each day. One euro is now worth about $1.05 U.S. It had been trading above $1.15 before enduring a long, slow decline over the second half of 2016.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-world-currencies-that-took-a-hit-in-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/new-100-bill-unveiled">New $100 Bill Unveiled</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-ive-been-trying-to-say">What I&#039;ve been trying to say</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/recession-journal-part-ii-broke-or-poor">Recession Journal Part II: Broke or Poor?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-new-normal-economy">The new normal economy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/book-review-life-inc">Book review: Life Inc.</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Financial News brexit currency dollar Economy euros foreign exchange market money pesos politics Tue, 17 Jan 2017 11:00:10 +0000 Tim Lemke 1873810 at http://www.wisebread.com Does A Dollar Buy What it Did a Year Ago? (Answer to win $10) http://www.wisebread.com/does-a-dollar-buy-what-it-did-a-year-ago-answer-to-win-10 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/does-a-dollar-buy-what-it-did-a-year-ago-answer-to-win-10" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/crumpled dollar.jpg" alt="value of a dollar" title="Value of a Dollar" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p class="MsoNormal">&nbsp;</p> <p style="margin-top: 0px; margin-right: 0px; margin-bottom: 15px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><em style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><strong style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; ">Winners update!! -- Congrats to the following winning submissions:</strong></em></p> <ul style="margin-top: 1em; margin-right: 1em; margin-bottom: 1em; margin-left: 1em; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; list-style-type: square; list-style-position: inside; list-style-image: initial; "> <li style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><strong style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><br /> <h3 style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; font: normal normal bold 1em/normal 'Trebuchet MS', sans-serif; color: rgb(153, 102, 51); line-height: 1em; ">A<a class="active" style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; color: rgb(153, 102, 51); text-decoration: none; font-size: 1.2em; " href="http://www.wisebread.com/does-a-dollar-buy-what-it-did-a-year-ago-answer-to-win-10#comment-322523">&nbsp;dollar goes further this</a>&nbsp;<strong style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; ">... Submitted by Carole (comment #19): &nbsp;</strong><strong style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; ">&quot;A dollar goes further this year than last year when buying gasoline.&quot;</strong></h3> <p> </strong></li> <li style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><strong style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><strong style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; "><a href="http://twitter.com/mmmeg">@MMMeg</a>&nbsp;&quot;$1 now buys more stuff you don't need, but less stuff you do&quot;&nbsp;</strong></strong></li> </ul> <p>&nbsp;</p> <p class="MsoNormal">I notice it every time I go to the grocery store to shop for my family of six: Same food = higher prices.<span style="">&nbsp; </span>With a little ingenuity, I can come away with about as much merchandise as did a year ago, and with only a slight increase in my total bill -- but it&rsquo;s much more work.<span style="">&nbsp; </span>Other items, like things I find on Craigslist and those hard-to-sell McMansions, are facing drastic crashes in their price points.<span style="">&nbsp; </span><o:p>&nbsp;</o:p></p> <p class="MsoNormal">What pricing trends have you noticed in the last year?<span style="">&nbsp; </span>Are you taking advantage of some of the pricing dives by refurnishing your living room on the cheap or working out amazing barters?<span style="">&nbsp; </span>Share your before and after example from the past 12 months, and you will be entered to win a $10 gift card!</p> <p style="margin: 0px 0px 15px; padding: 0px;">Those of you who aren&rsquo;t familiar with the &ldquo;drill,&rdquo; read below for full details:</p> <h2 style="border-style: none; border-bottom: 1px none rgb(217, 217, 217); margin: 0px 0px 5px; padding: 0px 0px 5px; font-family: 'Trebuchet MS',sans-serif; font-style: normal; font-variant: normal; line-height: normal; font-size-adjust: none; font-stretch: normal; color: rgb(51, 51, 51); font-size: 1.8em; font-weight: normal;">Win a $10 Amazon Gift Certificate</h2> <p style="margin: 0px 0px 15px; padding: 0px;">We're doing two giveaways -- one for random comments, and another one for a random&nbsp;<a style="margin: 0px; padding: 0px; color: rgb(0, 156, 204);" href="http://www.twitter.com/">tweet</a>s.</p> <h3 style="margin: 0px 0px 5px; padding: 0px 0px 5px; font-family: 'Trebuchet MS',sans-serif; font-style: normal; font-variant: normal; line-height: normal; font-size-adjust: none; font-stretch: normal; color: rgb(51, 51, 51); font-size: 1.4em; font-weight: normal;">How to Enter:</h3> <ol type="1" start="1" style="margin: 1em; padding: 0px; list-style-type: decimal; list-style-position: inside;"> <li class="MsoNormal" style="margin: 0px; padding: 0px;">Post your answer in the comments below, or</li> <li class="MsoNormal" style="margin: 0px; padding: 0px;"><a style="margin: 0px; padding: 0px; color: rgb(0, 156, 204);" href="http://www.twitter.com/">Tweet</a>&nbsp;your answer.&nbsp; Include both &quot;<a title=" @wisebread #moneytippers" style="margin: 0px; padding: 0px; color: rgb(0, 156, 204);" href="http://twitter.com/wisebread">@wisebread</a>&quot; and &quot;#WBTrivia&quot; in your tweet so we'll see it and count it.</li> </ol> <p style="margin: 0px 0px 15px; padding: 0px;">If you're inspired to write a whole blog post, please link to it in the comments or tweet it.</p> <p style="margin: 0px 0px 15px; padding: 0px;">At the end of the drawing, we'll update this post to include (and link to) all of your helpful responses.</p> <h3 style="margin: 0px 0px 5px; padding: 0px 0px 5px; font-family: 'Trebuchet MS',sans-serif; font-style: normal; font-variant: normal; line-height: normal; font-size-adjust: none; font-stretch: normal; color: rgb(51, 51, 51); font-size: 1.4em; font-weight: normal;">Giveaway Rules:</h3> <ul type="disc" style="margin: 1em; padding: 0px; list-style-type: square; list-style-position: inside;"> <li class="MsoNormal" style="margin: 0px; padding: 0px;">Contest ends Thursday, July 23rd at 11:59am CST. Winners will be announced after July 23rd on the original post and via Twitter. Winners will also be contacted via email and Twitter Direct Message.</li> <li class="MsoNormal" style="margin: 0px; padding: 0px;">You can enter both drawings -- once by leaving a comment and once by tweeting.</li> <li class="MsoNormal" style="margin: 0px; padding: 0px;">Only tweets that contain both &quot;@wisebread&quot; and &quot;#WBTrivia&quot; will be entered. (Otherwise, we won't see it.)</li> </ul> <p><strong>&nbsp;Good luck!&nbsp;</strong>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/linsey-knerl">Linsey Knerl</a> of <a href="http://www.wisebread.com/does-a-dollar-buy-what-it-did-a-year-ago-answer-to-win-10">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-barter-tell-us-and-enter-to-win-10">Do You Barter? -- Tell Us and Enter to win $10!</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/credit-card-and-debt-settlement-would-you-consider-it-your-chance-to-win-10">Credit Card and Debt Settlement? Would you Consider it? (Your Chance to Win $10!)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-does-the-word-recession-mean-to-you-answer-for-a-chance-to-win-10">What Does the Word &quot;Recession&quot; Mean to You? (Answer for a Chance to Win $10!)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-do-you-do-black-friday">Ask the Readers: Do You Do Black Friday?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/spend-less-this-valentines-day-and-win-an-ipod-touch">Spend Less This Valentine’s Day (And Win an iPod Touch!)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Giveaways dollar trivia tuesday Tue, 21 Jul 2009 17:00:02 +0000 Linsey Knerl 3413 at http://www.wisebread.com The sinking dollar, as viewed from overseas http://www.wisebread.com/the-sinking-dollar-as-viewed-from-overseas <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-sinking-dollar-as-viewed-from-overseas" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/foreign-currency-and-coins_0.jpg" alt="Foreign currency and coins" title="Foreign curency and coins" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>To someone in the US, the decline in the value of the dollar has mainly made itself felt up to now in the form of increases in the prices of globalized commodities--everything from <a href="/plan-for-expensive-fuel">oil</a> to <a href="/nonfat-dry-milk-no-longer-a-frugal-alternative">nonfat dry milk</a>. Consumer goods, even though many are imported, have only just very recently begun to show price increases. When you look at the picture as viewed from overseas, though, it&#39;s not as simple as just seeing the reverse.</p> <p>The most straightforward effect of of a lower dollar is that stuff manufactured in the US would be cheaper overseas.</p> <p>What, you may ask, is manufactured in the US anymore? Actually, quite a bit. The <a href="http://www.census.gov/foreign-trade/Press-Release/current_press_release/">US still exports</a> hundreds of billions of dollars worth of jet airliners, computers, telecommunications gear, and industrial machinery (together with parts for all those things). There are also thriving US industries selling things like chemicals and plastics. There&#39;s even good sales of consumer goods--especially medicines, but also toys, games, sporting goods, musical instruments, etc.</p> <p>All that stuff, together with agricultural goods, has added up to some $850 billion so far this year. Which means, since those dollars are down from €1.00 for a dollar to just €0.67 over the past 5 years, all that stuff is on sale. (The dollar is down similarly against the Canadian dollar over the same period from close to $1.60 Canadian to about $1.00 now.)</p> <p>So, on the one hand, with all that stuff on sale, you&#39;d expect to sell more. And we <strong>are</strong> selling more, but only to a modest extent, due to the many delays and complications inherent in trade. (How many jet airliners that US companies sell depends more than anything else on how many were ordered over the past couple of years. Drug sales are mainly a function of the latest medical research on the best treatments for various conditions and how many people have those conditions.) Being able to get them with cheap dollars will change things around the margins, but even for things where price changes make an immediate difference in how much people want to buy, there are still manufacturing constraints, shipping constraints, and so on. </p> <p>Even so, to the extent that US companies still make stuff--and that&#39;s a considerable extent, despite globalization and outsourcing--those companies can now sell stuff cheap enough that they can really compete.</p> <p>What that means is that, where there&#39;s a direct foreign competitor, that competitor is now comprehensively screwed. Just like US companies, those companies have already outsourced as much as they can. Any work that hasn&#39;t been outsourced has only been kept because the skill set just doesn&#39;t exist overseas or national policy requires that it be kept. So, with US companies being able to pay their workers with dollars that are only worth €0.67, European, Canadian, and other manufacturers are facing some serious competition.</p> <p>Of course, this requires that the US company actually be a competitor. This means, for example, that Airbus is in more trouble than, say, Toyota. (The yen is actually not up nearly as much against the dollar.) </p> <p>To the small company that&#39;s providing goods and services for the local market, this isn&#39;t so bad. They were already competing with all the usual globalized suspects; giving the US an extra 30% edge doesn&#39;t help, but any market where it would make the difference has probably already been grabbed by some much cheaper global player.</p> <p>For the major European and Canadian companies doing business in global markets, though, this is very bad news. </p> <p>Of course, major companies have large tax bills and large workforces. A drop in business would lead to lower tax revenues for the countries. It would also lead to layoffs--layoffs of voters. Those realities are going to put serious pressure on governments to &quot;do something&quot; about the value of the dollar. </p> <p>What can be done? Well, any central bank can hold the value of its currency down as low as it wants, if it&#39;s willing to buy an arbitrarily large amount of the other currency. That&#39;s what China has been doing for years now. The result, though, is inflation. The other central banks can join the game, if they want. They probably don&#39;t. In fact, even China is getting out, having decided that it&#39;s really got all the dollars it wants.</p> <p>Beyond that, there will be political pressure brought to bear, but it&#39;s hard to bring that sort of pressure to bear on the US. A falling dollar makes Americans poorer in some sense, but not in ways that prompt ordinary people to demand better from their government. In the old days of the gold standard, the pressure would appear in the form of foreign sellers demanding actual gold instead of mere paper, the excess paper money that leads to a collapsing currency would be automatically curtailed. Nowadays, though, the pain of a falling currency is very much spread around--foreigners suffer about as much as Americans, and neither suffers so very much as to make the value of the dollar a major political issue.</p> <p>Things will likely go on as they have, with people who have dollars trying to find something of value to spend them on. Once you&#39;ve bought all the jet airliners, network switches, and soy beans that you want, you&#39;re pretty much down to buying stuff for investment. <a href="/treasury-bills-for-ordinary-folks">US treasury securities</a> have been a popular choice, but US interest rates are now low enough that they wouldn&#39;t seem particularly attractive, even if they didn&#39;t face the obvious problem that your investment would still be in US dollars. US companies, with the credit problems stemming from the housing bubble and subprime loan debacle, should only be bought with a keen understanding of the underlying business. Still, there&#39;s plenty of other stuff worth buying in the US--land, for example. There&#39;s lots of that going on.</p> <p>There&#39;s a lot of anxiety about this issue. The US dollar is important enough in world trade, that if it keeps going down, trade will become disordered. There are enough dollars in the hands of people all over the world--foreign governments and their central banks, major corporations, wealthy individuals--that there&#39;s a serious incentive for them to get their governments to do something. And there are plenty of theories about just how bad that something could turn out to be. Personally, though, I don&#39;t find any of the doom scenarios very compelling.</p> <p>A complete collapse in the dollar is unlikely, because there&#39;s so much stuff you can buy with dollars that the currency will continue to have some value--it won&#39;t go straight to zero. Further, its slide in value is self-limiting because eventually both voters and the wealthy elite in the US will insist that it not fall further.</p> <p>The individual outside the US is really a bit player in this. You&#39;re mostly not in a position to buy farmland in the US or hedge your future purchases against currency fluctuations. If you work for a multinational corporation that pays its workers in some currency other than the dollar, but which competes with companies that do pay their workers in dollars, you might want to be a bit worried about your job; even if jobs aren&#39;t lost, raises and promotions are going to be harder to come by. Beyond that, enjoy the occasional cheap thing you can get that&#39;s made in the US.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/the-sinking-dollar-as-viewed-from-overseas">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-sinking-dollar">The sinking dollar</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-world-currencies-that-took-a-hit-in-2016">8 World Currencies That Took a Hit in 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-taken-how-to-evaluate-an-exchange-rate">Don&#039;t Get Taken: How to Evaluate an Exchange Rate</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/nonfat-dry-milk-no-longer-a-frugal-alternative">Nonfat dry milk--no longer a frugal alternative</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-celebrities-with-shockingly-low-net-worths">6 Celebrities With Shockingly Low Net Worths</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance canadian dollar dollar euro exchange rates globalization Sun, 25 Nov 2007 13:39:39 +0000 Philip Brewer 1425 at http://www.wisebread.com The sinking dollar http://www.wisebread.com/the-sinking-dollar <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-sinking-dollar" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/foreign-currency-and-coins.jpg" alt="Foreign coins and currency" title="Foreign Coins and Currency" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>It takes more than $1.40 to buy one euro today. It cost less than $1 as recently as late 2002. A Canadian dollar is worth just about exactly a US dollar--a parity not seen since the 1970s. Should Wise Bread readers care? If so, what should they do?</p> <h2>Higher prices for imported goods</h2> <p>The most obvious reason for US readers to care would be if a lower dollar led to higher prices for imported goods. When exchange rates make the dollar worth less, it seems obvious that it would take more dollars to buy all the stuff imported for sale in the US. The fact is, though, prices are generally set at what the market will bear already and those prices don&#39;t change very quickly in response to changes in the value of the dollar.</p> <p>The most immediate effect of of lower dollar is higher costs for importers--higher costs that they largely can&#39;t pass on to consumers. The result of that is a profit squeeze on the importers. Faced with such a squeeze, they do their best to push back at both ends--trying to get lower prices from their suppliers and trying to push higher prices onto their customers. It&#39;s hard to know to what extent they&#39;re being successful--companies keep that sort of data secret--but there&#39;s been no sign of a spike in prices for ordinary imported consumer goods.</p> <h2>Higher prices for raw materials</h2> <p>The price of oil, quoted in dollars, has risen for most of the year. Looked at in euro terms, though, the change is less stark. A $60 barrel of oil at the end of last year would have cost €46 versus €57 for an $80 barrel today--a 22% change in euro terms versus a 33% change in dollar terms. The price of oil really is up, but not as much as the price in dollars might suggest.</p> <p>Oil isn&#39;t the only raw material, of course. Prices of most basic materials--iron, gravel, lumber and so on--are all up in dollar terms. Like with oil, this is partially a real increase in prices, and partially just an effect of the falling dollar.</p> <p>(Given the high oil prices, the price of gasoline has been surprisingly low, at least in the US. Enjoy it while it lasts.)</p> <h2>Expensive travel</h2> <p>If you&#39;re an American traveling overseas, you will definitely notice the difference--everything will cost more. Without the buffering effects of importers and retailers who are willing to sacrifice some of their profits in the interests of maintaining market share or customer relations, you&#39;re stuck paying the local price.</p> <h2>People whose income and savings aren&#39;t in dollars</h2> <p>A good number of Wise Bread readers live in countries other than the USA. Of course, where you live doesn&#39;t matter so much as where you earn your money and how it&#39;s invested.</p> <p>To the extent that your wealth and income are in something other than dollars, the decline in the dollar provides some initial benefits--commodities priced in dollars are cheaper, as are goods and services from US sources.</p> <p>Longer-term, though, the benefits are less clear. Those foreign manufacturers benefiting because many commodities are priced in dollars, are in many cases the same ones taking a profit hit to keep selling to US importers. For those products where the US is still an exporter, the US firms have a growing exchange rate advantage--they can cut their price to foreign buyers and still bring home just as many dollars as before. If you&#39;re an owner or an employee of a firm with a US competitor, the lower dollar may hurt as much as it helps.</p> <h2>Longer term</h2> <p>Last week&#39;s <a href="http://www.economist.com">Economist</a> makes the point that, &quot;It is how steadily the dollar is falling that counts, not how swiftly.&quot; However much importers and retailers try to buffer the changes from the falling dollar, over the longer term the exchange rate matters, and there are plenty of doomsday scenarios that play out if people in other countries decide that they&#39;d just as soon not hold dollars anymore. Even a small shift in the preferences of the people and institutions that have been lending money to US borrowers could push the dollar down very quickly.</p> <p>The only way to retain those investments, if people start to move money out of the dollar, would be to raise interest rates sharply. But with the US economy already suffering from the <a href="/how-the-subprime-lending-boom-hurt-everybody">subprime lending crisis</a> and the resulting <a href="/credit-squeeze-formerly-know-as-a-panic">financial squeeze</a>, the flexibility for the Fed to do that is minimal--indeed, the Fed just lowered interest rates last week.</p> <h2>What to do?</h2> <p>Since we don&#39;t know which way exchange rates will move in the future, it&#39;s hard to provide any slam-dunk suggestions. Having some international <em>diversity in your investments</em> is always wise, but moving out of the dollar just as it hits record lows is not necessarily the best strategy. (You&#39;re too likely to find yourself unprofitably buying high and selling low.)</p> <p>If it were easy, probably the best thing to do would be to arrange to have some international <em>diversity of income</em>. It would be very nice if everyone had 15% to 20% of their income in foreign currencies so that it would grow when the local currency fell and vice versa--adding a stabilizing influence to household income. Sadly, that&#39;s not really practical for most people. Working for a multinational corporation provides a tiny sliver of the same benefits, but most of the upside will probably go to investors rather than employees.</p> <p>Still, as long as you have your income in the local currency, you can at least take advantage of the buffering effects mentioned earlier. The worst situation is to be living in a country with a rising currency while earning your income from a country with a falling one. (The situation of Americans living abroad just now.)</p> <p>For most Wise Bread readers, there&#39;s probably no benefit to taking any sudden or major actions just now. Maintain or gradually work toward an <strong>internationally diversified investment portfolio</strong>. Consider trying to develop some <strong>foreign-source income</strong>. Over the medium-term, arrange to <strong>live in the same country that the majority of your income comes from</strong>. If you can do at least a couple of those things, you&#39;ll be fine.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/the-sinking-dollar">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-sinking-dollar-as-viewed-from-overseas">The sinking dollar, as viewed from overseas</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/14-dirty-details-of-traveling-full-time">14 Dirty Details of Traveling Full-Time</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-world-currencies-that-took-a-hit-in-2016">8 World Currencies That Took a Hit in 2016</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-taken-how-to-evaluate-an-exchange-rate">Don&#039;t Get Taken: How to Evaluate an Exchange Rate</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/cheap-international-payments-with-esperanto">Cheap international payments with Esperanto</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance dollar exchange rates foreign currency international investing international travel overseas investing overseas living Mon, 24 Sep 2007 22:23:45 +0000 Philip Brewer 1202 at http://www.wisebread.com