The dollar is surging. This is who gets helped and hurt by its newfound strength

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The value of the U.S. dollar is surging at a moment when there are few clear bright spots in the American economy.

It's now the strongest it has been in two decades, and it's poised to get even stronger. The new power of the greenback is roiling economies and markets around the globe, and creating winners and losers.

Early Monday, the British pound reached a record low against the dollar after the United Kingdom's new finance minister announced a package of tax cuts meant to stimulate the country's economy.

Never before in history has the U.S. dollar's value been so close to the pound, and the news generated a sense of emergency for the U.K. central bank. Bank of England Governor Andrew Bailey put out a statement intended to reassure the country, saying the bank "is monitoring developments in financial markets very closely."

Just like in the job market, where unemployment's historic lows have meant an abundance of opportunities for workers and yet labor shortages for companies, the dollar's rise above all other currencies has cut both ways.

Recent global shocks, namely the war in Ukraine, have helped push up the dollar's value, since investors, companies and other countries often stow their reserves in dollars during tumultuous times.

But the overriding reason for the strong dollar is the fight against inflation.

The Federal Reserve is ratcheting up interest rates to attack the current near-constant rise in prices and said last week it expects more hikes this year. As it continues to raise rates, the dollar will strengthen.

Here is who a strong dollar helps, and who it hurts:

The winners

U.S. importers

For companies that buy goods from overseas, purchases are less expensive.

"For importers, it's a positive story," says Jordan Rochester, a senior foreign exchange strategist at Nomura Securities. "For anyone importing from the likes of China, importing raw metals and energy from abroad, that's going to be positive for you — as long as it's not priced in dollars, of course."

On top of that, having a strong dollar mutes the effects of inflation.

U.S. travelers

For the first time in two decades, the dollar and the euro achieved "parity," meaning one dollar is worth as much as one euro, and the two currencies are still pretty close to even.

So, U.S. travelers can get better deals on hotel rooms and meals out when they travel to Europe, or anywhere else right now. For them, it's like the world is on sale.

The losers

Multinationals

Executives of multinational companies with headquarters in the United States have started to complain that the dollar's strength is hurting profits.

"We had a great quarter, but yet again, the dollar had an even stronger quarter," Salesforce CEO Marc Benioff said during an earnings call recently.

Salesforce is based in San Francisco, but it sells its software all over the world, in different currencies. Benioff noted that in this fiscal year, a strong dollar is likely to cost the company more than $800 million.

Michael Klein, a professor of international economic affairs at Tufts University, says that when a company like Salesforce converts what it makes in another country into dollars, it gets squeezed.

"Repatriated profits from abroad, in euros or pounds or yen, are going to be worth less in dollars, because a dollar is stronger," he explains.

Emerging economies

Two factors are hitting emerging economies especially hard as the dollar strengthens:

First, most of the world's commodities are priced in dollars. That means oil and wheat and soybeans grown in emerging markets are going to be more expensive.

Second, a stronger dollar is a strain on countries that have debt denominated in dollars. Interest payments are going to be more expensive, and so is refinancing.

Many U.S. exporters

What's good news for importers isn't good for many exporters. When the U.S. dollar is strong, American-made goods become more expensive — and less attractive to shoppers — in other countries.

U.S. tourism

People living in many other countries where the currency is now weaker than the dollar may think twice about traveling to the United States. As the dollar gets stronger, their visits will become more expensive.

https://www.npr.org/2022/09/27/1124284032/strong-dollar-euro-pound-foreign-exchange-fx-inflation

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Decent and basic overview of what we can expect from a strengthening US dollar.

One interesting question that was brought up on this forum. Is whether inflation protected provided by the US dollar were easier to access through FOREX or through purchasing stablecoins pegged to the dollar like tether.

I'm not 100% certain on that. It is possible that foreign restrictions and regulations on FOREX could make US dollar inflation protection more accessible through crypto stablecoins than through FOREX markets which would allow them to directly buy the dollar.

Would anyone go so far as to say that the US dollars strength will be consistent over the long term? The US economy must be the ultimate decider of which direction the dollar travels in. Does anyone envision the US economy recovering anytime soon. To provide a good foundation for dollar value being maintainable.

The European economy is currently the one struggling the most, mostly due to the imposed sanctions caused by the Russian-Ukrainian war. The U.S. dollar is the most common currency used around the world. It is used in global trade (oil prices, for instance, are in USD, not EUR), while even countries such as El Salvador or Panama have adopted the U.S. dollar as their official currency. Thus, it's expected for the USD to be stronger than the EUR, especially during Europe's massive recession. Will the current exchange rate be sustained in the long term? Quite possibly, I'm afraid.

On the other hand, those of us in Europe can actually benefit from the EUR/USD exchange rate. In the past, the Euro was stronger than the US dollar; thus, if we were to sell Bitcoin at $20.000, for instance, we'd receive €19.000; now, we'd get an approximate 1:1 ratio, receiving €20.000.

From the increase in the dollar, there are indeed those who profit and there are those who feel that they are at a loss, yes, like people who want to take a vacation to America, of course, it will cost a lot because the price of the dollar goes up, but there are also those who benefit from the increase in the price of the dollar, for example like people who invest in ,USDT, a lot of them benefit because the price goes up, and finally they get a big profit.

In my country, the stronger US dollar has detrimental effects to the majority of the population. We are a developing country which is highly reliant on imported goods. The growth of USD means the rising of prices here. Even the cost of basic utilities such as water and electricity is also rising along with the US dollar.

But to the millions of families here who are dependent on remittances from the US, this is good news to them. This is also a welcome development to those who are working here but are paid in US dollars.

It's bad for importers and exporters which in the end is the US government that is just making money. With the strength of the USD, only their neighboring countries which are part of America will be trading with them. The strength of the currency will isolate the economy as the other side of the world is starting to abandon using USD also.

The government can't also bring the price down because the people will feel inflation if its value also goes down.

The strengthening US dollar is certainly a good thing for the United States. But I'm pretty sure with the increasing value of the US Dollar. will make the tourism sector in countries that use the US dollar decrease in the number of visitors. Because tourists will definitely think twice. because they have to spend more money to travel to countries that use US dollars.

and I found the facts in the country where I work now. namely here the price of goods such as electronics that should be when the dollar increases in value then the price of goods increases. but in fact the opposite is true. The price of electronic goods is even lower. even though I know that most electronic goods in this country are imported from abroad using US dollars.

it turned out that after I searched, the reason was that the price decline occurred or was caused by a factor in the demand for goods or buying interest that was not too high. or there is a decrease in buying interest or perhaps a decrease in purchasing power as a result of the economic crisis that occurred.

The dollar is only getting stronger because GBP/EUR is getting weaker, that is to say that the dollar is not actually getting stronger at all. I'd agree that USD is stronger than any other currency right now, but that's only attributable to the energy crisis in Europe.

US economy in recession, trillions of dollars in debt, 8.3 inflation rate. I don't think "surging" describes the current state of USD.

When the factor of raising interest rates continue, I think that we will only see the dollar get more stronger, war is a temporary boost because there's only so few investors and it's not like it's never going to run out. I don't think that the working class Americans are going to benefit from this increase in strength though, as you've said, there's only few groups that's going to benefit from this, too bad.