The economic shock that the coronavirus crisis has caused has resulted in the demolition of two years of stock market gains and millions of job losses. While this might seem like dire news, especially in the country that’s had the highest number of total deaths in the world, there’s something interesting that’s occurred as a result: the US dollar is still going strong.
As investors all over the world try to manage the stress surrounding the uncertainty, they’re beginning to look for safe assets and the USD is one of them. CNN reports that since the crisis began to heat up in the Western world in late February and early March, the US dollar index has risen to near-record highs. Here’s how that’s impacting things and what you need to know.
What Does Strong USD Mean for Businesses?
As businesses around the world and more specifically within the United States begin to wonder just how they’re going to survive this crisis, numerous entrepreneurs are looking for a way to cut costs and stay afloat. And, a strong dollar is a pretty positive thing for American businesses at the moment. It means that imports (during normal times where travel bans and cargo restrictions aren’t a factor) are cheaper and companies importing raw materials from abroad will enjoy a lower overall production cost and, subsequently, a higher profit margin. However, businesses that conduct their operations overseas or investors who have their hands in foreign businesses might suffer a bit as a consequence of a strong US dollar.
Is Strong USD Good for the American Economy?
Generally, yes. A strong USD means that consumers usually reap the benefits. If the US dollar is strong against the euro, for example, the price of imports falls drastically. So, when importing European goods and products, consumers ultimately pay lower prices and pocket the extra cash. This, in turn, benefits the American economy as consumers have more spending money to use that they can later inject back into the economy in different ways, whether that’s creating businesses that yield more jobs or simply spending money on other consumer products.
When the US Dollar is Strong, It Benefits Other Countries, Too
This statement is both true and, well, somewhat not true. Foreign travel for Americans is cheaper when the USD is strong. And, when travel is cheaper, coupled with the fact that most tend to have more spending money when
Numerous countries outside of the United States depending on tourism, such as Bangladesh, Pakistan, India, Venezuela, and the Philippines. So, when Americans are able to travel abroad due to a strong dollar, they’re also able to spend much more, thereby injecting cash back into local economies and businesses. However, this is also true of citizens from other countries with strong currencies such as the euro, the British pound, or even currencies in the Middle East. So, it’s not all about a strong USD.
Leveraging a Strong US Dollar During the Coronavirus Crisis
As mentioned, most of these analyses are true during normal times, not during a global pandemic. Even though the US dollar is strong, consumers don’t have much buying power because many are jobless. And, travel abroad has come to a near standstill in the past month. So, how does the United States leverage a strong dollar during the coronavirus crisis? There’s currently a robust market for the purchase of US treasuries. Other countries, such as China, have trillions of dollars worth of treasury bonds, ultimately giving the US a bit of leverage, especially when the dollar is strong.
Saving While the US Dollar is Strong
So, a strong USD is mostly positive for the American economy and businesses. But, as an individual, what can you do while the dollar is strong? It’s hard to predict with certainty what things will look like a month or two from now, as the world continues to change so rapidly and so does the economy.
However, one thing’s for certain, and it’s that regardless of what happens with the economy, you should still be thinking about different ways to save during the coronavirus crisis. From seeking financial assistance to learning how to manage your finances, there are more than a few ways to ensure you come out on the other side of the pandemic financially healthy. Signing up for a debit card that’s optimized with your savings in mind. Our FDIC-insured 100% free Cheese Debit Card offers users lots of great opportunities for more savings by saving bonuses and cashback.
Interested in learning more? Sign up today to get started unlocking savings that’ll help you get through this pandemic and hopefully add more to your spending fund so you can take advantage of the strong US dollar.