Why does a stronger dollar decrease dollar denominated prices?

Discussion in 'Forex' started by nooty, Aug 17, 2009.

  1. nooty


    Why does this happen?
  2. Pascal


    The current growth policy of the US government is built on increasing debt, and a slow, steady currency devaluation. If the value of the currency appreciates, that debt gets more expensive relative to other currencies and assets. So, a strong dollar creates problems for debt servicing.

    Secondly, as the dollar is still the reserve currency for commodity assets, when the dollar strengthens, commodities fall in nominal terms.

    With a globalized economy, most american multinational corporations have their revenue base in other currencies, in which they use to repay their borrowed dollars.