A strong currency is generally seen as a good thing. That would seem to give our nation reason to cheer, as the dollar hit a six-year high against the yen and a one-year high against the euro last week.
But be careful what you wish for, says
MarketWatch chief economist Irwin Kellner. The greenback's surge is a "mixed blessing," he says.
On the plus side, it lowers the price of oil and other imports. For goods and services priced in foreign currencies, each dollar now buys a bigger slice. This limits inflation and increases consumers' buying power.
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On the negative side, a rising dollar makes our exports more expensive and lowers the profit of U.S. companies selling overseas when their revenue is repatriated into dollars. In addition, the greenback's appreciation makes it more expensive for foreigners to invest in the United States.
"Is this a vicious cycle or a virtuous cycle? It all depends on which side of the coin suits your needs," Kellner writes.
Meanwhile, Albert Edwards, chief global strategist for Societe Generale, is concerned about the yen's weakness.
"We have long believed that investors ignore Japan at their peril," he writes in a commentary provided to Moneynews.
"We have felt for some time that a fragile Chinese economy could be pushed over the edge by a further yen devaluation, in many ways a replay of the Asian crisis of 1997. . . . The next phase of global currency wars may have begun."
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