What the strong dollar means for small businesses
If you’re keeping up with the financial news, or you’ve just tried to change money to or from USD in the past few weeks, you’ll probably have noticed that the US dollar is unusually strong at the moment. According to the US Dollar Index, which tracks the strength of the US dollar against 6 other leading currencies, the dollar is at a 20-year high.
Now, while the dollar is usually strong against currencies in developing economies, it’s rare for it to be so high compared with developed currencies like the British pound, euro and yen. In early September, the dollar broke all records to trade at 140 to the Japanese Yen, 1.00 to the Euro, and achieve almost parity with the UK pound.
Why is the USD so strong?
Economists explain that there are two main reasons for today’s strong dollar. One reason is that it reflects the way people think about the US economy. The US is relatively stable economically speaking, and interest rates are high but consistent. When there’s any kind of economic uncertainty, as millions are currently experience around the world with in the form of high inflation and the cost of living soaring, people tend to buy “safe” assets like the USD, which is a well-established, trusted currency.
The other reason is that the rest of the world is dealing with an energy crisis and negative real interest rates, which is depressing their economies. This economic depression lowers the value of their own local currencies.
The strong US dollar has a lot of economic implications across the entire world, though, and particularly for cross-border ecommerce business owners, import or export SMBs, and anyone who manages international payments to global suppliers, contractors, or other business partners.
How does a strong dollar affect ecommerce businesses?
The impact of a strong dollar on your ecommerce business all depends on where you source your goods from and which markets you sell in. If you import from areas like Europe or Asia and you sell in the US, the strong dollar could help you make more sales.
This is because when the dollar is strong, it means that goods imported into the US are relatively cheap. Ecommerce sellers who export from countries with weaker currencies into the US can take advantage of the strong dollar to price their goods lower and encourage people to buy more. So, if you sell on US platforms and have funds in USD, it’s a good idea to top up stock levels now, while your dollar has more buying power.
On the other hand, if you’re exporting from the US or trying to sell US-made goods in overseas markets, the strong dollar will make it harder for you to grow your business. When the USD is strong, commodities are more expensive in local currency in real terms, which lowers demand. That’s why US-based brands like Apple and Procter & Gamble are currently seeing sales drop.
What does the strong dollar mean for international businesses?
The bottom line from all this is that if you’re running a global business, or you’re a contractor who works with international clients, you’ll want to store income in USD, instead of converting the funds into local currency straight away.
Being able to operate in dollars instead of a local currency is a strategic financial advantage as anything you buy in dollars will cost less, relatively speaking, than if you paid in your local currency. You’ll also save money by keeping funds in USD, and then using those funds to pay your own suppliers.
How Payoneer can help you take advantage of the strong dollar
Getting paid in USD, into a USD account, can usually be tricky. This is where Payoneer’s multi-currency accounts can help.
Payoneer offers a local USD account that operates exactly like a USD account in a local bank. This all-in-one account gives you everything you need to get paid by your international clients and global marketplaces, pay your suppliers and invest in growing your business. What’s more, you can use your Payoneer account to receive payments in USD and store them in dollars for as long as you like.
Payoneer’s easy cross-border payments solution also allows you to send payments in USD and convert into other currencies at the very best rates and the lowest low fees. With the right strategy, and supportive tools like Payoneer, your global business can benefit from the strong dollar, and find ways to grow no matter what happens to the global economy.