How a Weak US Dollar Can be Good

When the U.S. dollar is weak, this can help narrow the trade gap -- a sensitive political issue, whether good or bad for the economy. It also can give a shot in the arm to stagnant growth by giving U.S. companies leeway to raise prices, and boosts demand for exports overseas. The net result can be new hiring, business investment and, eventually, accelerating growth. Ultimately, though, inflation leads to higher interest rates, which damps economic growth. (from November 2004)