Rising U.S. Dollar and Falling U.S. Exports

Chart of the Week for Nov. 21, 2008 - Nov. 27, 2008

As the chart above illustrates, U.S. Exports have declined and the U.S. Dollar has increased over the last three months. Among the many factors causing a decline in U.S. Exports are the global economic slowdown, the recently settled Boeing strike, and the rise in the U.S. Dollar. The U.S. Dollar has been boosted by investors selling international stocks and/or bonds and repatriating (buying) U.S. Dollars. Also, the U.S. Dollar has benefited from international investors buying U.S. Dollars in the hope that the U.S. will be better able to weather the global slump than other countries.

The good news for the U.S. Dollar has meant bad news for U.S. Exports as international demand for U.S. products has suffered two fold: (1) U.S. products are more expensive in foreign currencies when converted from a stronger U.S. Dollar; and (2) Global demand for goods and services has waned as the credit crisis has slowed the global economy.

A strengthened U.S. Dollar can have benefits for U.S. consumers as U.S. dollars can purchase more on the international market. However, a stronger U.S. Dollar can dampen U.S. Exports which has been seen as a stabilizing area for the U.S. economy.

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