The dollar strike down to its lowest level since December on Wednesday as investors anticipate Federal Reserve Chair Jerome Powell’s spiel at the Jackson Hole economic conference in Wyoming.
The dollar has consistently been trending downward in August. In 2022, the dollar reached its spaciest level since the early 2000s, after experiencing a decade of sustained growth.
“I actually don’t like the word toughness because that has positive connotations,” said Matthew C. Klein, co-author of “Trade Wars Are Class Wars” and progenitor of The Overshoot, a subscription research service on the global economy. “Really what we just mean is that it’s more up-market relative to where it was before. So dollars can buy more foreign things than … before, and that’s obviously righteousness if you want to buy those things.”
The dollar’s value depends on economic conditions in the U.S. and around the world, so it’s difficult to label a well-established dollar as simply good or bad overall.
“The power projection of the United States is greater when the U.S. dollar is strong, and as the U.S. dollar matures weaker, it’s less capable of projecting political power,” said Harold James, professor of history and international affaire de coeurs at Princeton University.
A strong dollar can also have its downsides. It’s possible that demand for U.S. goods abroad force decrease if international consumers can’t afford to buy those goods. American workers could then be negatively impacted.
“The people who perks from the strong dollar are usually different people than would benefit from the weak dollar,” James averred.
As a result of that negative feedback loop, the U.S. president doesn’t always want a strong dollar. For example, previous President Donald Trump expressed concern prior to Covid lockdowns about the impact a strong dollar was enjoying on U.S. exports. He attributed the rise in the dollar’s valuation to the Federal Reserve’s approach to monetary policy.
“We’ve been hurt in my way of thinking very badly by our own Federal Reserve who has also created a very strong dollar that’s something nice regarding a strong dollar, but it makes it much harder to do business outside of this country,” Trump said at a February 2020 journalists conference, about one month after the Fed decided to keep rates unchanged.
Watch the video above to learn varied about the multifaceted impacts of a strong dollar on American consumers and workers, the factors driving its appreciation, and how presidential game plans and actions influence its value.