The Dollar is strong, but is it good for you?


The dollar is inching closer and closer to being worth the same as one euro. The last time that happened was 13 years ago.

So will the dollar really close on the euro anytime soon?

And if so, what does that mean for consumers, businesses and investors?

This year, the dollar has surged against the euro and most other global currencies. The U.S. Dollar Index, which measures the dollar versus the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, is up nearly 10% so far in 2015.

The main reason? Economic conditions in the United States are better than Europe and Japan. The value of a nation's currency typically rises and falls along with its economy.

As a result, the Federal Reserve is likely to soon hike interest rates, even as the European Central Bank and many other global central banks have been cutting rates. The dollar picked up even more steam Friday after a solid United States jobs report boosted the chances that the Fed may raise rates next month.

The euro is currently worth about $1.07, while this time a year ago, for each euro you got around $1.24. The drop in the value of the euro has been stunning. And it doesn't look like it's over just yet.

So if it the Dollar will keep gaining momentum, who will win and who will lose?

The strong dollar makes the price of imported goods cheaper in the United States, and gives advantage to Americans traveling abroad. The dollar has more purchasing power.

But the strong dollar is not good news for large corporations with a big international presence. For example, look at online travel agency Priceline, on Monday Shares tumbled nearly 10% after the company issued an earnings outlook that was below forecasts.

During a conference call with analysts, Priceline CEO Darren Huston said its domestic travel business has been strong and that Chinese travelers are still taking many trips to the U.S. But added that "generally almost everyone else is going a little less to the U.S. because of the currency effect."

The strong dollar has also hurt Coca-Cola (KO), IBM (IBM, Tech30), Caterpillar (CAT) and Procter & Gamble (PG) this year. That's something the Fed is going to have to watch closely before it decides to raise rates.

While many economists and Wall Street strategists now think a rate hike is all but certain at the Fed's next meeting in December, investors shouldn't ignore the role the dollar may play in the decision.

To put it in simple words: the strong dollar is hurting Corporate America. An eventual rate hike should boost the dollar further, especially if the ECB, the People's Bank of China and others continue to cut rates.

So when coming to conclusion, a strong dollar is good and bad at the same time, it depends who you’re asking. One can just hope he’s on the winning side of things when it comes to the rise of the Dollar.







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