This article will reveal the 10 set of people who benefit when the rate of he United States dollar goes up. We will also tell you how these 10 set of people make profits when a dollar is said to be strong.
What is a Strong Dollar?
A dollar said to be strong when its value or rate against other currencies increases. When the value of the dollar rises in the foreign exchange market against other currencies, we consider it to be strong. A strong dollar has huge benefits and disadvantages, while some people are making profits during this time, others are counting their loses.
Now that we have told you what a strong dollar means, let us now reveal the 10 set of people that benefit from a strong dollar.
1. American Consumers
When the United States dollar increases in value against other currencies, prices of imported goods in the U.S. becomes cheaper. For example, luxury cars that are imported from Europe, example, Mercedes Audi, Porsche, Ferrari, and BMW, will automatically fall in dollar price if the value of dollar rises. For example, let us say that a luxury car from Europe costs 80,000 euros with an exchange rate of 1.40 dollars per euro, that car will cost $112,000. However, if the price of dollar against euro increases to 1.25, that same car will now cost $100,000.
2. U.S. Citizens Traveling abroad
These are the second set of people that benefit from a strong dollar, traveling from America to other countries becomes cheaper when the U.S. dollar increases in value against other currencies. U.S. citizens or residents traveling to other countries will have less expensive foreign travel and more degree of buying power when the dollar appreciates in value against the currency of the country they are visiting. This is because the prices of things in foreign countries are not greatly affected by a rise or fall of the United States dollar, Americans will buy more goods in other countries with a strong dollar.
3. U.S. Citizens or Expatriates Working and Living Overseas
United States citizens and expatriates that are living and working overseas will enjoy a cheaper cost of living if they are still receiving income in dollars. Any of them that still has the U.S. dollars will benefit as the dollar value increases in the foreign exchange market.
4. American Companies
American companies importing raw materials from overseas will benefit greatly from a strong dollar. As the dollar gets stronger, the prices of importing these raw materials from abroad will reduce and this will give them a reduced total cost of production. Of course we know that a reduced total cost of production translates to larger profit margins.
5. Multinationals doing Business in the United States.
Multinational companies doing business in the United States will benefit from a strong dollar. Any multinational company with a large number of sales in the U.S. and earning in dollars will make more profit when the value of dollar increases. Since they are not spending their earnings much in dollars, they will see more gains once they covert the dollars to the local currency of their base country.
6. Investors in Multinational Corporations
As multinational companies make more profit as a result of the increase in the value of the U.S. dollar against other currencies in the foreign exchange market, people who are investors in these multinational companies also see their investments increase. As the companies see more gains on their balance sheets, their investors as rewarded as well.
7. Companies Exporting to America
A company that is exporting goods to America will benefit greatly from the rise of dollar value in the foreign exchange. This is because the value of their exported goods will increase since the dollar value has increased and those goods are sold in dollars. Once they get paid in dollars, converting it to their local currencies will see them making more gains because of the strong dollar.
8. Countries Exporting to America
As the United States dollar keeps getting stronger, there is a transfer of demand form the economy of the United States to global economy. This means that world economies like Europe will see a boost in their exports and this leads to a more healthy and balanced global economy. The GDP of countries exporting to the United States will increase as a result of a strong dollar.
9. Foreigners Working for Americans Online
This is one group of people that benefit immediately there is an increase in the value of the United States dollar. Foreigners who are working virtually or as freelancers for Americans or other countries and get paid in dollars benefit instantly from a strong dollar. This is because their payments will still be made in dollars and they will change to their local currency which will see them make more gains. For instance, as we speak, freelancers in bloggers in Nigeria are currently benefiting from the high dollar to naira aboki exchange rate.
10. American students studying or carrying out research abroad
American students that are studying or carrying out researches abroad will benefit more as the dollar keeps getting stronger. As long as these students receive monies from their parents, guardians, or sponsors, in dollars, they will have more buying power when they convert the U.S. dollars to the currency of their studying country.
What are the three key takeaways of a strong dollar?
- The increase in the value of the United States dollar means more gains for some and loss to others.
- Americans have experienced less expensive foreign travels and cheaper imports with the United States dollar getting stronger over the years.
- American companies exporting or relying on global markets for the major part of their sales suffer loses as dollars get stronger.