Can someone explain what makes the dollar fall?

Although I work on Wall Street (I'm at a nonprofit, people!), I don't really understand what makes the dollar rise and fall--or any kind of currency for that matter. I'm a librarian, a writer, a runner--not an economist, or one who pays attention to market fluctuations and such. Can someone explain what are the factors (jobs, I'm guessing, stocks, recession stuff, economy...??) that make the dollar rise/fall, and is there anything the average traveler can do about it (I'm guessing NO!)?

Thanks!

You don't even know what a can of worms you opened with that question.

There are many influences and people fight over which is in effect. Faith in the economy is one of them. It is based on faith not fact so it can change at the drop of a hat.

Supply and demand can then take over. If everyone wants to buy dollars to put in an American bank because interest rates are high, then it costs more Euros, or whatever, to buy them - the dollar value goes up. Interest rates go down, then sell dollars for Euros, or whatever, and the dollar goes down.

That is just one of many reasons for the dollar to go up or down. I'm sure that you will now see some serious arguing from economic geniuses as to what is actually at work. Just remember, it is all speculation and theory.

quote:

If everyone wants to buy dollars to put in an American bank because interest rates are high, then it costs more Euros, or whatever, to buy them - the dollar value goes up.

This is probably the single biggest factor. Not only because interest rates are high, but because of confidence in the dollar in general.

Our current regime is trying to falsely prop up our economy by lowering interest rates to unheard of levels thereby stimulating foreign exports (in the name of economic growth) while at the same time reducing the attraction of foreign investment.

It is IMO almost completely dictated by our government's actions, rather than world trends.

i agree, it is a common misconception that world trends dictate the value of the US dollar...our economy is doing well, yet the US dollar continues to drop people think oh no what is going on with the economy? They don't always go part and parcel together

Criticize or threaten Israel, that'll make the make the dollar drop fast, and make gas costs go way high.

Gravity.

Sorry - I couldn't resist.

braslvr is on the right track.

The root of the problem isn't consumer confidence, thats the effect. The true problem lies in a number of things such as our trade deficit(buying more foreign goods than we produce), insanely out-of-control government spending, and many other factors.

The 'cure' for these things is for the fed to lower interest rates(aka print more money). Its the creation of money out of thin air that pays for an estimated 30% of our government spending every year. I havn't paid $40,000 in taxes since 2003 for our war in Iraq, that money has to come from somewhere.

As a result of this inflation, we get lax credit policies, which drive up prices of homes, cars, food, gasoline simply because there is more USD in circulation. This affects oil on the world market because everyone else has to sell their currency and buy dollars to purchase oil. A weak dollar means oil costs ALOT more for everyone else in the world... nobody likes this.

Our economy has actually declined greatly since 2001 if you price it in euros, CAD, AUS, gold, or almost any other currency in the world because we print money faster than they do.

Great question Cherie. I often wonder the same thing.

From the limited reading I do - there are so many different factors. Many of which are explained in this thread.

From an travel perspective, this makes it more expensive for Yanks to go outside the US, but cheaper for non-Yanks to come here and travel (Yes - I know that is obvious). We have seen a trend of more Aussies/POMs coming to the US in the past year, as well as buying our US priced trips on BWA which confirms this thinking.

From an investment perspective, I have been dumping my little IRA into some emerging market funds (VEIEX) the past 5 years. I reckon some other countries economies will be growing faster over the next 10 years then the US. Not sure how all this affects the dollar etc - but this global economy stuff can super fun (Hey look how cheap it is here!) - but can also bite us in the arse (Damn - europe is 60% more expensive now than it was 7 years ago)

I am interested in learning more about this - but the books/mags that discuss it bore me. Thanks everyone for sharing.

It´s just eCONomics. ---- eCON. Any explanation will therefore be mumbo-jumbo.

Yes, that's an easy one. You hold a dollar in your hand, turn your hand over and let go,. Result 'falling' dollar.

Couldn't resist that. Hehehe.

Have a nice day, Whistler.


Dear Lord, please make me chaste but not just yet. SMC.