The American Dollar
Usually, a strong dollar is good news. However, credit unions should be aware that as the U.S. dollar gains strength, it's possible that other currencies might not be keeping pace. The U.S. dollar has been on the rise for a while, and is currently trading almost at par with the Euro.
Foreign investors take note of variances like these, and the reason is simple. Because the U.S. is an economical superpower, the U.S. dollar is widely used as a gauge by others when making purchases of items, both tangible and intangible. This holds true for many commodities, and for United States exports.
Foreign investors are watching closely (those who have already invested, and those considering investing). The lure of continued investment in U.S. goods, services, real estate, industry and other aspects of the economy WILL be influenced by the relative strength of the dollar to the investor's currency. The current strength of the dollar affects decision–making in these areas: some to the benefit of our economy some to our detriment.
The reason? The price of the product they are manufacturing or purchasing will increase, and will most definitely affect the profit–making plans of foreign investors.
The U.S. should once again be proud of the long–sought–after economic influence represented by the strong dollar. Commodities like gold and silver sustain their reputation as strong investments, as their value continues to grow.
However, other common foreign investments (such as U.S. bonds backed by the U.S. dollar) may not be as attractive to foreign investors, the relative weakness of their own currencies may not make such investments seem worthwhile.
So what does this mean for credit unions? Well, to the degree that your loan portfolios might depend on overseas borrowers (while, of course, avoiding any sort of preferential treatment). Awareness of the effect of the strong dollar on a foreign borrower's cash flow can help to inform your decision-making when servicing or taking applications for these types of loans.
Typically, the overall impact of the stage we're enjoying at the moment will not be drastic, however, it is better to be “in the know” rather than left wondering.
Economies and currency values continually ebb and flow. It's important to keep your finger on the pulse of the dollar, and make adjustments accordingly.
To read similar articles please visit Oak Tree Business Systems, Inc. May 2016 Advantage – Credit Union Trends.
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