Dollar weakening.....questions....

[mistymoney]

So - the dollar is weakening along witht he stock market.

What implications for cash and bonds does this have? I am assuming this will add to inflation woes. If in fact, we still buy stuff from other countries.

For things that we don't rely on imports, how will a falling dollar value affect us on american made stuff? That doesn't, for the sake of argument, rely on imported raw materials.

What can investors do?

[Rob_bob]

A falling dollar is in relation to foreign currencies.  U.S. exports will be more attractive, not counting tariffs.  Foreign investments will gain/hold value and dividend payments will be worth more to a U.S. investor.  Imports into the U.S. will be more expensive.

Domestic inflation is what erodes buying power for all goods.

[ChpBstrd]

Also, a weaker dollar contributes to inflation by making imported goods AND services more expensive.

In the absence of tariffs, a weaker dollar would have encouraged foreign demand that would compete with domestic demand, driving up domestic prices for domestically-produced items, but in our current case the tariffs have more than negated this effect.

Finally, a longer-term weakening trend in a currency, or a political policy of weakening one's own currency, causes investors to eventually demand higher real yields to offset their exposure to currency risk. High real yields act as a brake on the economy. Higher retail margins are required to exceed the cost/benefit ratio of the alternative to buying inventory: just buying bonds.