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February 16, 2010

All Business: Strong dollar can hurt U.S. recovery

  • Every 1 percent increase in the dollar, knocks U.S. exports down by about $20 billion annually and destroys some 150,000 jobs, according to a nonpartisan research group.
    AP Business Writer

    NEW YORK — Ben Bernanke and Tim Geithner keep saying that they support a strong dollar. Now that we have it, they should eat their words.

    At a glance
    WHAT’S HAPPENING?: It costs $1.37 to buy one euro. Three months ago, it took $1.51 to buy one euro. That means a dollar will go 10 percent farther now than in November if you were exchanging the two currencies.

    WHY?: Strength in the U.S. economy and economic woes in other parts of the world, namely Europe, are boosting demand for the U.S. currency.

    WHY DOES THIS MATTER?: A strong dollar hurts exports because it makes U.S. goods more expensive abroad. Exports have been a big contributor to U.S. economic growth.

    The dollar has surged to an 8-month high against the euro, and is also rising against other major currencies. If it keeps strengthening, that could damage the already fragile U.S. economic recovery.

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