The U.S. dollar (USD) (also known as the Greenback or Buck is the official currency used in the United States of America. Around the world, 85% of all currency transactions involve the US dollar, which is the world’s primary reserve currency. Twenty-five different currencies are pegged to the US dollar.
What does a strong dollar mean?
A strong dollar can benefit businesses, such as Wal-Mart Stores (WMT), that import raw materials or manufactured goods into the United States. A strong dollar can mean lower oil prices, as the United States purchases much of its oil abroad.
What does a weak dollar mean?
A weakening dollar benefits companies with foreign competitors, such as US Steel (X), since their competitors’ goods become more expensive. A weakening dollar can also lead to rising interest rates, as investors require higher rates to compensate for the added currency risk. Higher interest rates, in turn, have significant consequences for the housing market and business investment in general.
A weak dollar usually results in oil producers charging more to protect their margins.