On Monday, the euro traded at $1.19, compared to $1.36 just a year ago and an all-time peak of about $1.60 in 2008. Other major foreign currencies including the Japanese yen, the Canadian dollar and the Chinese yuan have also fallen sharply against the dollar over the past year.
Economists predict that the dollar will continue to strengthen throughout 2015, especially if the Federal Reserve raises interest rates later this year as expected. Here’s a look at the small-business “winners” and “losers” of a strengthening dollar:
Losers: Small exporters. As more small businesses look internationally for customers, a strengthening U.S. dollar is problematic. It means foreign customers will have to spend more to export goods from the United States, and they will be more tempted to buy things domestically.
U.S.-based online retailers trying to build a global customer base may find it harder to entice foreign shoppers to click the “buy” button and pay for international shipping from U.S. shipping firms.
Winners: Small importers. On the flipside, U.S. companies that import a lot of goods from international markets or spend a lot of time overseas—spending money along the way—will also benefit. As exchange rates of foreign currencies slip, it’s a buying opportunity for U.S. businesses.
Winners: U.S.-focused companies. Companies that rely on U.S. consumers and businesses spending confidently could see good times ahead. The dollar is strengthening in part because the U.S. is the shining star of the global economy right now. “The U.S. economy is heavily tilted towards consumption, and the strong dollar gives a purchasing-power boost to American wallets,” writes Matt Phillips at Quartz.
That could mean good news for local retailers, restaurants, and service businesses—which all rely on Americans’ willingness to open their wallets.
Winners: Travel agencies. Book international trips for U.S. travelers? You might have a blockbuster year. As international airfares fall—thanks to falling gas prices as well, of course—and foreign goods get cheaper, more Americans are likely to high-tail it to Europe, Asia and other foreign destinations. Both foreign leisure and business travel by Americans is expected to rise in 2015. A recent report by the U.S. Department of Commerce’s National Travel and Tourism Office shows that international travel by Americans is already on the upswing: Through October 2014, it found international travel was up 9.6 percent year-to-date. More Americans will likely travel more internationally.
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