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October 29, 2007

Ups and downs of a lower dollar

The U.S. dollar's value has been dropping against the value of foreign currencies. In other words, it's taking more U.S. dollars to equal one euro, the Canadian dollar and many other currencies. As bad as it sounds, economist Mike Walden points out there is a good side. Listen

"As we see in most areas .. of economics, there are good parts and bad parts of this trend. The bad part of it is that if you are traveling overseas, making a foreign trip, with a lower dollar that's going to be more expensive," says Dr. Walden, a professor of agricultural and resource economics at N.C. State University. "Also if you buy a significant number of foreign imports -- if you like foreign food or you buy foreign cars -- those will also be more costly with a lower-valued dollar.

"On the other hand, if you are a manufacturer here in the U.S. and you sell some of your products to foreign buyers, you will actually find those foreign buyers now more interested in buying your products because of the lower-valued dollar. It actually makes our exports cheaper,"Walden adds. "And if you are, for example, the operator of a
tourist attraction here in the U.S. and you find that some of your customers (consumers) are foreign people traveling to the U.S. for vacations, you'll find more of them coming because again their currency will go further.

"Economists think that right now actually a lower-valued dollar overall -- when we balance these good parts and bad parts -- is good for the U.S. economy because it will cause our trade deficit to actually go down somewhat," he concludes. "However if the dollar were to plunge significantly in a short period of time, that would be bad."

Posted by deeshore at October 29, 2007 08:00 AM