The US dollar has appreciated dramatically over the past fifteen months — from a trade-weighted level of 102 in July 2014 to 120 recently. In some respects, this is a really good thing. Americans can buy all sorts of foreign goods at an almost 20% discount from a year ago. But the strengthening creates a serious challenge for the big American multinationals with large foreign operations.
The standard concern is that the high US dollar hurts America’s manufacturing cost position because US production costs are inflated by the dollar’s appreciation. But the truly global US-based companies no longer produce dominantly in the US for export; they produce around the world, which means that the rising dollar is by no means a terrible thing for their production costs.
Read the full article at the HBR.org.