What Affects the Value of the US Dollar?

By Dennis Cuneo

Supply & Demand

• A demand for US products leads to an increased demand for US dollars.!

• The buyer of US goods will have to purchase those goods and services with the US dollar. Since they need to exchange their own currency, they’re essentially buying US dollars.!

• This transaction is usually conducted in the form of bonds issued by various corporations, so the US receives more benefits.

$$$

Trade & Investment• Often considered by analysts to

be the most influential aspect in the economy to the dollar’s value.!

• Balanced trade represents the difference between exports and imports in the US, with exports hopefully higher than imports.!

• When exports are higher than imports, it’s called a surplus; when the numbers are reversed, then it becomes a deficit.

Inflation & Interest• The value of your currency

exchange rates changes with the market’s inflation.!

• A lower inflation rate means the prices of your goods and exchanging them with other countries will increase at a slow-but-steady rate.!

• If a country maintains higher interest rates, then it actually boosts the value of currency by drawing in foreign capital.

Sentiment & Philosophy• The way that the rest of the world views the

US matters a lot.!• If a country views us as “weak” with a

struggling economy, they could sell back their bonds, which is bad for business.!

• Financial relationships and history are both important in regards to the competency.!

• Treat and nurture trade relations with the utmost respect.