Currency: Taking advantage of the strong dollar
The U.S. economy keeps going up and up—and so does the strength of the U.S. dollar, said Amrith Ramkumar in The Wall Street Journal. The dollar continues to defy analysts’ expectations “that it will finally soften as the 10-year U.S. economic expansion ages”; in the 12-month period that ended in June, it rose 1.8 percent. Normally, leaders cheer on the strength of their currency. But President Trump continues to call for a weaker dollar, claiming “its strength puts the U.S. at a competitive disadvantage” by making it more expensive for multinational companies to convert overseas revenue into U.S. currency. He has also accused other countries—especially China—of manipulating their currency against the dollar’s strength in order to boost exports and jobs. Several American companies are citing the strong dollar as a headwind to their second-quarter earnings, said Yun Li in CNBC.com. Jeans maker Levi Strauss, which counts on Europe and Asia for close to half its sales, blamed the “unfavorable currency impact” for slimmer margins and falling profits.
Trump clearly wants to push the dollar down, said Desmond Lachman in TheHill.com, but his policies are doing the opposite. His “America First” trade policy and punitive tariffs have created “a marked slowing in international trade growth” and a weakening in manufacturing abroad. That has caused central banks around the world to try to gin up their economies, loosening their monetary policy and lowering their currencies’ value. It’s also causing “foreign money to flow toward the dollar in search of a safe haven.” There’s only one way to sustainably deflate the dollar: stronger global growth, said Bhanu Baweja in the Financial Times. Unfortunately, the global economy is weighed down by China’s economic stagnation. Trump could direct the Treasury to “take matters into its own hands” and intervene in currency markets. That would likely start a currency war and “torpedo an already fragile international trading system.” The probable result? An even stronger dollar.
The dollar’s strength might worry politicians and economists, but it’s also an excellent excuse to travel overseas, said Stacey Lastoe in CNN.com. Right now, in Budapest, for instance, the dollar stretches a long way. The Michelin-starred Borkonyha Winekitchen “offers a five-course tasting menu for less than $80 USD based on current exchange rates.” In Vietnam, though the flight might be a bit costly, you can stay at Hanoi’s five-star Sofitel Legend Metropole for less than $300 a night. Closer to home, just look to Canada, where the strength of the U.S. dollar—now worth $1.30 Canadian—makes for an appealing summer trip. ■