Price of the Dollar
State of our currency does affect you
By Robby Valderrama
Throughout your life you’ve
heard this phrase. “The dollar is worth…” But
does it really matter what the dollar is worth? You might say,
“I can still get two tacos for a buck at Jack in the Box™,
so I don’t care.” Although this state of ecstasy works
temporarily, there are substantial consequences to the rising
and falling value of the dollar.
Let’s pretend you are visiting Mexico. Generally speaking,
if you want something at a significantly cheaper price, you can
find it there. However, the more the dollar falls, the less money
you save by traveling to Mexico.
Delving further into the matter, the price of the dollar is also
significant for investors throughout the world. For example, with
the recent decrease in value the dollar has endured, Japanese
investors have been feeling progressively less confident to invest
in America. A few weeks ago, on January 19th, the dollar was equal
to Y102.6 (Y stands to Yen, the currency in Japan). According
to a recent article from Financial Times, “The dollar at
or below Y100 is a big psychological level and many investors
are reported to have stop-loss orders set just beneath that point.
If those were triggered, there could be a heavy wave of dollar
selling.” Transcribed into common English, this means that
many Japanese investors watch the value of the dollar to decide
when to stop investing in dollar-based interests. When the dollar
gets to a certain value (Y100), the American economy will take
a big hit.
Profit margins are eroding for American companies that rely on
foreign raw materials, such as the semiconductor industry. For
instance, a year ago, one U.S. dollar was worth Y107.2. At price,
Japanese merchants could charge $9328.35 for a million Yen. Now,
at the current rate of Y102.6, the object would be worth $9,751.82.
Contrasted with a year ago, for every million Yen, Americans are
now making $423.27 less profit off any imported Japanese goods.
As many learned from the recent recession, there are many negative
effects this can have. When the American economy suffers, the
monetary value of everyday items will increase. Ultimately, even
the price of those tasty Jack in the Box™ tacos will rise.
So next time you hear the phrase “The dollar is worth,”
listen up, because, whether you like it or not, what you hear
next will affect your life.
