Diversifying Into Other Currencies
The following is a transcript of "Money Girl's Quick and Dirty Tips for a Richer Life," a podcast from QuickAndDirtyTips.com. The audio program is available via RSS feed here and at TheStreet.com's podcast home page.
Hello and welcome to Money Girl's Quick and Dirty Tips for a Richer Life.
Today's topic: Diversifying into other currencies.
A listener named Dave emailed me with this question:
How is the U.S. dollar valued on the international market? Why does the value fluctuate? And more importantly, why is the U.S. dollar now in a free fall? I'm a U.S. citizen living in New Zealand. I often transfer funds from the States to New Zealand. With the value of the dollar falling (which is correlated to the New Zealand dollar's rise), I experience a monetary disadvantage with each transfer.Thanks for the questions, Dave.
The Declining DollarThe U.S. dollar is falling and it's especially noticeable to U.S. citizens traveling or living outside of the United States. Measured against a trade-weighted basket of other currencies, the dollar has lost a quarter of its value since 2002 and 6% since August. When the dollar falls relative to other currencies, the prices of imports in the U.S. go up, and the prices of U.S. exports go down, creating more demand for U.S. goods that are sold overseas. A weak U.S. dollar means that your money doesn't buy you as much when you're traveling or living abroad and converting U.S. dollars to other currencies.
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