Is The Appreciation Of US Dollar Good Or Bad? The impact of the appreciation of the US dollar; The rise in the value of the US dollar means that consumers in these countries need more local currency to acquire the goods and services manufactured by US companies, which means the weakness of their competitiveness in front of competing companies dealing in currencies of low value, which would hurt the sales of these companies and thus the decline in profitability.
Foreign exchange markets have experienced many changes and fluctuations in recent years as a result of the change in global economic data, especially after the financial crisis witnessed in the world in 2008, which some countries still fall under their influence.
Recent years have seen the dominance of the US dollar as compared to the major currencies in the currency market, such as the British Pound, the Euro and the Japanese Yen.
Since 2012 alone, the US dollar has appreciated more than 30% against major currencies.
The reasons for the strength of the US dollar against the currencies of competition
The strength of the US dollar is due to the strength of the US economy and the different monetary policies of the United States and its counterparts in the global economic forces.
At a time when the US economy is seeing a significant improvement in GDP growth, EU countries continue to suffer from several economic and political problems. Growth rates in many EU countries remain close to zero in the uncertainties and uncertainties of the future. The European Union after Britain’s historic decision to withdraw from the Union and break a partnership lasted 4 decades.
Another factor that increases the strength of the US dollar is the variation in monetary policy. Since 2016, the Federal Reserve has started raising interest rates, given the positive economic data relating to the rate of growth and the decline in unemployment rates.
While the European Central Bank continues to pursue a policy of stimulus to keep rates below zero in an attempt to raise inflation and avoid a recession in the economies of European countries.
The same applies to Japan, which, although its economy is much better than that of the European Union, is still pursuing a stimulus policy to make its exports more competitive.
Pros and cons of the appreciation of the US dollar
The appreciation of the US dollar against most major currencies and currencies of emerging economies such as Brazil, India and China is a two-edged sword.
The rise in the US currency is negative for American companies that depend on exports of goods and services abroad because these goods will become higher in other countries.
The rise in the value of the US dollar means that consumers in these countries need more local currency to acquire the goods and services manufactured by US companies, which means the weakness of their competitiveness in front of competing companies dealing in currencies of low value, which would hurt the sales of these companies and thus the decline in profitability.
Which makes Bitcoin Code investors avoid investing in the shares of these companies and the search for other investment solutions.
On the other hand, companies operating within the United States that depend on the import of products and services will benefit from their activities from abroad.
So that the appreciation of the dollar in the foreign exchange market means that the ability of these companies to buy goods and services from other countries will increase, so that these materials will become cheaper, which means reducing the total cost and increase the margin of profitability for these companies.
The same applies to consumers within the United States of America so that the value of products imported from abroad will become cheaper.
Investors in equity markets will therefore direct their investments to non-export-oriented firms and look for companies that rely on the US domestic market and will not be affected by the greenback’s appreciation and most other currencies.