Why You Can Feel Up When the Dollar Is Down

By Bernard Condon, AP Business Writer

NEW YORK (AP) β€” The way investors have unloaded the U.S. dollar lately, you'd think it was kryptonite.

It has fallen 10% against the euro in just three months, and recently hit a 15-year low against the Japanese yen. You'd have to go back even further to find the American currency in a weaker position versus the Swiss franc or Australian dollar.

The decline has been so dramatic that fear is spreading of a "currency war" akin to the one in the Great Depression, when countries competed to drive their exchange rates lower.

It sounds like a downer: Strong countries are supposed to have strong currencies. But when a country is struggling to grow as the U.S. is now, a weak currency can act like a shot of adrenaline. Here's how.

Exports

A falling dollar is like slapping a "For Sale" sign on U.S. goods and services abroad. Consider the price of an iPhone in Paris before and after the dollar dropped. At exchange rates in July, a $99 iPhone with eight gigabytes of memory would have been worth about 78 euros. Now that price translates to 71 euros.

Cheaper prices bring higher sales, and hopefully more jobs at home for companies selling products overseas. The impact could be huge: Companies in the Standard & Poor's 500 get half their revenue abroad.

"There's a lot at stake," says Aroop Chatterjee, a currency strategist at Barclays Capital. "A lot of countries are dependent on exports, and a lot of the job growth comes from that."

Imports

A falling dollar raises the price of foreign goods sold here. That makes it more likely that Americans will buy cheaper rival products made by U.S. companies.

But unlike exports, the impact on the economy is not all good. First, the boost to U.S. companies is less than you might assume because so many goods made here contain parts made overseas. If those parts cost more, so will the price of U.S. finished goods.

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