The US Dollar Index — which measures the dollar's value against a basket of six major currencies including the euro, yen, and pound — has reached its highest level since 2002, driven by the relative strength of the American economy, elevated US interest rates, and safe-haven demand from geopolitical uncertainty.
The strong dollar creates clear winners and losers in the American economy. American travelers are the most obvious beneficiaries: a dollar buys 20% more in Europe, 35% more in Japan, and 28% more in the UK than it did three years ago. US consumer purchasing power for imported goods is elevated, which has helped contain inflation even as domestic service prices remain elevated.
American exporters are the primary losers. A strong dollar makes US goods more expensive for foreign buyers, reducing demand for American-made products abroad. Boeing's aircraft, Caterpillar's construction equipment, and John Deere's farm machinery have all reported reduced international order volumes attributed to dollar strength.
US multinational corporations face a different problem: their foreign earnings translate into fewer dollars when repatriated. S&P 500 companies with significant international revenue — including Apple, Microsoft, and Alphabet — will collectively report an estimated $45 billion in currency translation losses this year.
