By: Catherine Tan

Thanks to the USFederal Reserve’s interest rate increases, the US dollar has reached a 20-year high. Americans vacationing abroad are especially happy about the new and improved exchange rates . On the other hand, US corporations fear falling profits and even worse, plummeting stocks.

The current high value of the dollar is largely due to higher interest. Investments in dollars return more money, encouraging foreign countries to exchange foreign currency into US dollars. Not only are dollars enticing, but the Ukraine war and energy crisis in Europe have discouraged investors in Europe, causing the euro to fall in value.

A strong dollar is appealing to US consumers looking to travel or purchase from foreign countries. Imports are cheaper for normal people. Perhaps more importantly, this has helped ease American inflation by cutting import costs for large corporation.

However, the strong dollar makes US goods more expensive in foreign countries. When converting foreign sales into dollars, companies lose even more money on their already downward trending stock values. This scales to an estimated decrease in earnings of S&P companies by about $100 billion this year.

US companies receive about 30% of their total earnings from overseas, according to Morgan Stanley. Major exporters such as Boeing are suffering from decreased exports. Microsoft generates half of its profits abroad and estimates its expected earnings will be lowered by $250 million for the current quarter.

Currently the United States does not look to intervene to weaken the dollar and make American products competitive in global markets again. The Fed does have arrangements to swap dollars for foreign currencies to other major central banks in Canada, the UK, Europe, Japan, Switzerland, and others.