Euro Dollar Exchange Rate
After reaching a low of 0.62 Euros per dollar, the dollar has regained some of its lost ground - now trading at 0.67 Euros. But, as this graph shows the recent 'strength' of the dollar is insignificant compared to its long term fall.
However, even this small reversal will come as welcome news to Americans who love to travel and buy from abroad.
For the US economy the strong dollar is something of a mixed blessing.
Exports The weak dollar has been boosting growth in the US, at a time when other sectors have been struggling. Without exports increasing by 8% a year, the US economy may already be in recession; as it is the US economy continues to struggle along.
- However, on the other hand, you could argue that relying on a very weak dollar to underpin the economy, provides only a mere temporary respite and masks the underlying problems of the US economy.
- Imports cheaper.
- Lower demand for exports and hence domestic Aggregate Demand
- Exporters forced to try and increase efficiency.
Current Account deficit. The current account deficit seems of small concern these days, with the housing and financial crisis. The recent weakness of the dollar has slightly improved the deficit from 6.5% of GDP in 2006 to about 5% of GDP now.