10 Countries That Benefit from the Falling Dollar

The "weak dollar" has made headlines for several months now. Although U.S. currency has been losing value in the forex market since 2002, the current American economic troubles have driven the dollar sharply lower while making its decline seem more concerning. The main problem these days is that a weak dollar can cause inflation by compelling importers to raise prices of goods they sell to American companies and consumers. On the other hand, many countries stand to gain from the dollar’s low value. Here, in alphabetical order, are some of these beneficiaries.

  1. Afghanistan: A Taliban resurgence, among other concerns, is keeping many traders away from the afghani, Afghanistan’s currency. The country has many immediate challenges to face, but a solid currency will eventually be important if Afghanistan is ever to become a fully developed nation. Though historically tied to the dollar, the afghani has tended to depreciate dramatically in recent decades. Afghans able to do so have accumulated dollars due to U.S. currency’s safety, thereby marginalizing the afghani. The falling dollar, along with legislation mandating that many types of transactions be conducted in afghanis, may bolster the national currency and help to position it as the currency of choice.
  2. Argentina: Argentina’s efforts to prevent its currency from strengthening too quickly have helped prevent the dollar from falling against the Argentine peso. The country is now one of a few bargains left for American tourists . That holds true for American businesses considering international expansion, as well. A capital influx from North America would dramatically increase Argentina’s chances of full recovery from the economic collapse of 2001.
  3. Belarus: Belarus currently pegs its currency, the ruble, to the Russian ruble. That’s set to change in 2008, when the country will sever the tie with Moscow and link the Belarussian ruble to the dollar. The move has more to do with politics than monetary poilcy, but Belarus may be timing its conversion just right. The dollar is near a three-year low against the Russian ruble. If American currency continues to fall, Belarus could essentially buy in to the dollar at a particularly low value, then sit back and wait for appreciation. "Buy low" is just as true for the forex market as it is for the stock market.
  4. Canada: The U.S. dollar has recovered somewhat after bottoming out at less than 94 cents to the Canadian dollar, or "loonie," in November. Nonetheless, the Canadian dollar continues to reap the benefit of attaining some overdue respect. Gone are the days when Robin Williams joked, "Canadian money is also called the loonie. How can you take an economic crisis seriously?" The currency of such a highly developed and stable country, which maintains a GDP in the global top ten despite having a population lesser than Sudan’s, may find itself playing a larger role on the world stage, thanks to its recent performance against the U.S. dollar.
  5. China: All things considered, the weak dollar is probably a losing situation for China. It puts increased pressure on the Chinese government to let the artificially weak yuan appreciate in the open market, and it forces the massive number of companies who supply U.S. imports to raise the prices they charge American buyers. But it also gives China more political bargaining power by drawing attention to the so-called "nuclear option" of economic policy. That term (which comes from the Chinese government-controlled media itself) refers to China’s ability to dump some of its huge dollar holdings, thereby wrecking the dollar. Most of this threat is just posturing, of course — and even if China were to sell off it’s dollars, the damage it caused would dramatically reduce the value of the dollars it hadn’t yet sold — but the weak dollar is helping China show the world that it will not be bullied .
  6. India: Cheap dollars and expensive foreign currencies make American outsourcing less attractive, right? Outsourcing is basically a way to import labor (at a lower hourly wage than can be had in the domestic market). But, as with other types of imports, Americans who buy that labor are having to pay more for it than they have in the past. That would seem to harm Indian outsourcing companies, which contribute over a third of the country’s service sector output. In fact, the opposite has been true. These companies now have to earn American business, rather than simply rely on the cheapness of their workers. The phenomenon is fostering a culture of innovation like the one that has always helped American businesses achieve success. In addition, the weak dollar is creating buying opportunities for large Indian manufacturers who want to reduce expenses by establishing footprints in the U.S.
  7. Mexico: The dollar has not fallen significantly against the Mexican peso yet, but a drop allow importers to buy American goods on the cheap. The country is the second largest recipient of American exports, so the benefit could be significant. At the same time, Mexican exporters would receive less for the goods they sell to the U.S. and therefore have incentive to find new trade partners. More than 85 percent of Mexican exports currently go to the U.S., representing an unhealthy lack of diversification.
  8. New Eurozone Countries" The major European economies have had more than enough of the weak dollar, but new participants in the Eurozone — those countries that use the Euro as their currency — might be getting in at the right time. It’s true that, like the Euro standard bearers including Germany and France, their export sectors could suffer due to the relative expensiveness of their new currency. That problem would probably be short-lived, however, compared to the positive effects that would be realized if the strong Euro starts to replace the weak dollar as a global standard for foreign reserves. The newfound stature would increase demand for these countries’ treasury bonds and thereby make government fundraising easier.
  9. Switzerland: Switzerland and its currency, the franc, seem to be enjoying the upside of the falling dollar without suffering the downside. Economists believe "the over-valued [euro] boosts Swiss exports to its most important customers and the weak dollar mitigates the rising cost of raw materials that are traded in the greenback." The current state of the dollar is helping to tame Swiss inflation, as well.
  10. The United States!: Calling the dollar "weak" certainly makes it sound undesirable, but it’s not nearly as bad as it may seem. The boost for exporters outweighs the consequences for buyers of imports, and foreign companies that deal in pricier currencies are motivated to build long-term investments here. Most importantly, weakness in a country’s currency does not simply translate into weakness in its economy — even though it may seem so these days.