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Stronger Dollar Spells Opportunity
By David C. Harper, World Coin News
July 16, 2013

This article was originally printed in World Coin News.
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Now might be the time to visit Australia if you are paying for a trip using the U.S. dollar and are covering costs in Australian dollars.

Why? So far this year the exchange rate has moved strongly in favor of the U.S. currency, taking its Australian counterpart from $1.06 to 90 cents in the first half of 2013. That 15 percent depreciation is quite sharp as foreign exchange market fluctuations go. Fractions of one percent are the usual order of the day for the world’s major currencies.

While visiting the land down under, perhaps a few numismatic bargains can be purchased with the U.S. currency.

And it is not just the Australian currency that has gotten weaker. Many other countries’ units of account are sagging as well in terms of greenbacks.

Norway’s krone has been knocked lower by 10 percent this year. This occurred even as the Scandinavian kingdom remains as rich in off-shore oil deposits as ever.

The Japanese yen is another currency that has seen a very large decline in value when expressed in U.S. dollar terms.

None of these countries can be lumped with chronically weak economies like Zimbabwe.

While the decline of any single national currency can be rooted in problems specific to that country, a general appreciation of the U.S. dollar against the currencies of the world is a far rarer event that usually then stretches over many years.

Could this be what the bullion market has been signaling?

It has been common wisdom that the U.S. dollar is weak and getting weaker – at least if you read the hard money newsletters advocating the purchase of gold and silver. Nobody could disagree as the prices of metals bounced off their 2001 lows and then rose for many years running. That story changed as both metals peaked in 2011 and have been clobbered in 2013.

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If you step back and just look at foreign exchange tables now, the narrative is also pointing to a strengthening U.S. dollar.

This spells change for the cash flow of the numismatic business. A weak U.S. dollar means an outflow of numismatic items for sale to buyers possessing stronger currencies.

A stronger dollar means American collectors and dealers can fan out and buy their hearts’ desires using a newly hefty currency even as the sellers get as many or more units of currency of the country where the sale takes place.

Will that mean the World Money Fair in Berlin in 2014 will see more Americans? It might, though oddly, the euro despite all the negative headlines about the euro zone’s economy, has not been one of the significantly weaker currencies.

It could simply be early days for a new phenomenon and the euro will eventually follow the Australian dollar, Norwegian krone and Japanese yen lower.

Significant increases in the value of the dollar occurred in the 1981-1985 period and again from roughly 1994-2002. Both uptrends created eye-opening exchange rate values.

Remember the British pound at $1.05? That was 1985. Remember the euro at 83 cents? That was 2002.

Both exchange rates were at extreme lows and anybody who was ready to buy things at those rates made money as the exchange rates snapped back to more normal levels.

It looks like the dollar’s uptrend has staying power and that will give American numismatists added spending power to inject into their purchases.



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