What makes the dollar weak or strong?

Question

What makes the dollar weak or strong?

Answer 1

WHY IS THE DOLLAR WEAK IN RELATION TO OTHER CURRENCIES?

It's unfortunate, but the current Presidental administration has seemed to advocate a "weak dollar policy" that has driven down the value of the dollar in relation to other golbal currencies (like the Euro and Yen). Incidentally, the weak dollar is one of the major contributing factors to our current high gasoline prices. Since oil can only be purchased in dollars, regardless of the country doing the purchasing, a weak dollar inflates the prices for barrels of oil, which translates to higher gas prices. One cause of this weak dollar is, no surprise, the war in Iraq that is causing a major spending deficit (i.e. we are spending more than we are taking in, going into debt). This seems like a big irony doesn't it? The oil-rich country we are fighting in is causing the oil from that country to explode in value.

When we have deficit spending like we do now, we have to borrow the money from other countries. We basically sell them treasury bonds (somewhat similar to the "T-Bills" you can buy at your local bank). China is the country that is purchasing a majority of these bonds, so China is keeping America financially solvent right now. But at the same time, China is importing many more goods into the U.S. than the U.S. is exporting. Americans love to buy all those Chinese goods that line the shelves of stores like Wal-Mart, because they're cheap (which is why the U.S. has a trade deficit with China). But importing Chinese goods doesn't provide American manufacturing jobs for people in the U.S. If there were good paying manufacturing jobs in the U.S., people with those jobs would then pay income taxes to the Federal Government. This seems like a big irony, doesn't it? Chinese trade is lessening the tax stream to the Federal Government; this revenue would lessen America's spending deficit, which means that we wouldn't have to sell the bonds to China in the first place.

Additionally, the absence of deficit would strengthen the value of the dollar, making gas and other commodities cheaper. This, in turn, would fuel economic prosperity by lowering raw costs for companies (so they could hire more workers instead of having to cut back) and putting more money into the hands of American workers who could buy more things (causing companies to need to hire more workers), all of which causing the dollar to strengthen further and making the value of the dollar stronger against foreign currencies.  (If you're interested, the articles I've sourced below are very interesting. They are also respected in academic and/or political circles)

Answer 2

The value of the dollar depends on the demand for dollars to buy our exports and to invest in the US and the supply of dollars  from people in the US buying imports and US people and companies investing in other countries, that is the balance of payments. Like all markets  supply  equals demand in equilibrium and  the value (price) of the dollar adjust to make the balance of payments zero.

Answer 3

Steroids will make it strong, but also angry.  If it sit's around all day eating while watching tv it is sure to be weak.

Answer 4

The dollar is strong when the other currencies are weak. :D

Answer 5

eating too much fast food...

Answer 6

A currency become strong when amount of the currency demanded are lower than amount of the currency offered.

A currency become weak when amount of the currency demanded are higher than amount of the currency offered.

Answer 7

gdp (gross domestic product)

unemployment rate

interest rates

inflation

national debt

whether the country is a net importer or exporter

all these things  have a positive or negative influence on the

strength of the dollar

there are others as well but these are the main ones