Us Dollar Case Study

Since last year, there have been interesting changes in global currencies trends. These switches are causing many different advantages and disadvantages depending on the country and the characteristics of some industries.

The thing is that the US dollar has been raising against the euro and this situation triggers many repercussions for the global economy. The euro reached its lowest point in nine years, therefore the dollar is appreciating.

The dollar index, which measures the value of the US dollar against its most significant trading partners, determined that this currency has increased its value in a 15 percent since June last year until January this year. This economic scenario is changing the way of interaction between the most powerful

exporters. For those American companies that export their goods or services to the world and compete in the global market, things have turned into a negative situation because they are losing competitiveness. For example, if you are a firm established in the United States and you are competing with a European firm, then the European firm will be more competitive than you because their products are cheaper than yours in the global market. But we need to consider that this reality also affects other countries such as Ecuador that have the U.S. dollar as it

Inflation has been lower in Europe than in the United States, but the dollar appreciation and the fall in other currencies will make American inflation to go down and European and Asian inflation to go up.

Generally, major central banks do not center their economic policies on currency values, but they need to face any circumstance that influences inflation. Therefore, European Central Bank and Bank of Japan will have a higher inflation because prices will rise faster; while the Federal Reserve could present a lower inflation, so they should wait before increasing interest rates.

The last factor to analyze is the travel and tourism industry. Today’s conditions give great advantages when Americans want to travel overseas because their currency is well valued, so it is cheaper for them. Conversely, it is more expensive for foreign people that want to travel to the US.

In fact, Europe is 12.5 percent cheaper than six months ago in dollar terms, which makes it more attractive for American tourists. On the other hand, the United States is less attractive for foreign people because they have to spend more now than before to visit the same American destinations or