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Bottom Dollar?

Weakening U.S. currency could change how you do business.
April 1, 2005
URL: http://www.entrepreneur.com/article/76682

Whether the U.S. dollar is weak in an absolute sense is up for interpretation. But there's no question that it's a lot less muscular than it was a few years ago. And it's likely to get weaker yet, as Asian countries that have been protecting the U.S. currency--to boost their own exports--will eventually have to back off. In this environment, imported goods become more expensive while American exports become cheaper abroad. Over time, U.S. interest rates also move higher.

What does that mean for your business? If your competition is primarily international, a weakening dollar is nirvana. Whether you actually sell your product in this country or abroad doesn't matter. Relative to those international competitors, you're in better shape. On the other hand, if you import goods and sell them domestically--retailing, for example--then you might find yourself on the pointy end of that particular stick.

"If you're competing with overseas companies or selling overseas, you'll like this," says David Wyss, chief economist at Standard & Poor's Corp. "If you're importing stuff from overseas, you might want to look around to see if you can get it cheaper somewhere else."

Hedging isn't practical for most small companies. If you can't keep costs down by finding U.S. sources for products you normally buy internationally, you might eventually have to bite the bullet and pass the costs along to customers. But take heart, Wyss says. "All your competitors' costs are going up, too," he says. "Once everybody's costs are up, there's no choice [but to hike prices]."