Is a weaker U.S. dollar a good thing?

"The U.S. dollar's value has fallen 8% over the past year, as the price of gold has skyrocketed, said the WSJ Dollar Index. Some think it is a good thing. President Donald Trump said recently a weaker dollar is great. The idea is a weaker currency boosts exports and employment while a strong currency can throttle an economy. While the idea of a weaker dollar has had supporters over the decades, economists often argue gains can be eaten up by domestic inflation and deflation."

"Caroline Freund, UC San Diego School of Global Policy and Strategy YES: A weaker currency can help the economy by boosting exports and discouraging imports. But the gains are uneven: consumers lose as imported goods and foreign travel become more expensive. And the U.S. dollar's role as the world's reserve currency, an economic and strategic advantage, makes it more complicated. If the dollar weakens because of erratic U.S. policies and foreign investors shunning U.S. assets, the damage will far outweigh any trade benefits."

The dollar has fallen around 8% over the past year while gold surged. A weaker currency can increase export competitiveness, support domestic production and boost tourism. Offsetting effects include higher costs for imported goods and foreign travel, which raise consumer prices and inflationary pressures. The dollar's global reserve role creates strategic and economic advantages that complicate any net assessment. If depreciation reflects loss of investor confidence or erratic policy, the economic and strategic costs can exceed trade benefits. Net outcomes depend on the causes of weakness and how gains and losses are distributed across the economy.

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