Forex Blog: Currency Trading News & Analysis.

March 18th 2005

Weak Dollar not helping trade imbalance

The US trade deficit is widening, despite the weakening of the USD. In theory, a weaker dollar should make US goods and services more attractive to foreign consumers. Moreover, foreign goods and services should become more expensive. The former has proved true, as American exports have surged. However, foreign businesses have reacted to increasingly unfavorable exchange rates by lowering their prices, so as not to lose market share. There are two factors in the trade balance- exports and imports. And imports have not shown any signs of slowing, as the booming American economy has left American consumers with more disposable income, which they have used to import more foreign products. Furthermore, the Chinese Yuan is pegged to the dollar, so a weaker dollar has had no effect whatsoever on the US-China trade deficit, which grows wider every day. The World Peace Herald reports:

With the dollar declining, it was expected that exports would surge. They are not, and part of the problem is that U.S. firms are increasing prices rather than going all out to get market share. That is a short-term profit maximization philosophy that will not leave the country or the firms in a whole lot better shape than before the dollar decline.

Read More: Weak Dollar not improving US trade

SocialTwist Tell-a-Friend
Posted by Adam Kritzer | in US Dollar | No Comments »

Sponsored Offers

FREE Daily Email Updates

Enter your email address:

Delivered by FeedBurner

Have Questions? Want to Share Your Review?

Be heard. Please share your reviews today!

Neighboring Posts

© 2004 - 2024 Forex Blog.org. Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.