The first time I realized the U.S. dollar had real power was during a trip to Italy. I was at a café in Florence, espresso in hand, doing the very grown-up math of currency conversion. The dollar was strong that month—1 euro cost me only about $1.02—so my 2-euro cappuccino came out to a little over two bucks. Back home, I was paying nearly $6 for the same thing, without the view of the Duomo.
That was the first time I felt what economists talk about all the time: the real-world perks (and quirks) of a strong dollar.
But the dollar’s strength isn’t just about better travel deals. It affects your everyday life—often in ways you don’t see until you’re paying less for a smartphone, struggling with an international investment, or wondering why your favorite imported wine is on sale.
So let’s unpack it: what actually happens when the dollar gets stronger? How does it affect your travel budget, the price of everyday goods, and your investment strategy? This isn’t just theory—it’s dollars in your wallet, and value in your portfolio.
What Does It Mean When the Dollar Is “Strong”?
Let’s keep it simple: a “strong dollar” means the U.S. dollar is worth more compared to other global currencies. It has more buying power. You can trade fewer dollars to get more foreign currency.
For example, if $1 used to equal 0.85 euros, and now it equals 0.95 euros, the dollar has strengthened relative to the euro. You now get more euros per dollar than you did before. Great for tourists, tricky for some exporters.
The strength of the dollar is usually measured by indexes like the U.S. Dollar Index (DXY), which compares the dollar to a basket of currencies including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.
So when you hear headlines like “the dollar hits a 20-year high,” that typically means the DXY is up, and the dollar is gaining strength relative to these major currencies.
According to the Federal Reserve, the DXY hit a 20-year high in late 2022, with the dollar particularly strong against the yen and euro, due to rising U.S. interest rates and global uncertainty.
Now, let’s explore what this means for you in three areas where the impact shows up fast and loud: travel, imports, and investing.
Travel: The Upside of a Strong Dollar Abroad
This is where the average American feels the difference immediately. A strong dollar means your money stretches further in other countries. Translation? Cheaper vacations and more room in your travel budget for experiences, dining, and upgrades.
You get more for your money.
Hotels, meals, transportation, and souvenirs in countries with weaker currencies become more affordable. A $100 dinner in Paris might now cost you $90 thanks to a favorable exchange rate.
You can upgrade without the guilt.
That hotel with a view, the direct train instead of a budget bus, or the guided tour you were on the fence about—it all becomes more attainable when your dollar goes further.
But… not all countries benefit equally.
If you’re traveling to places that peg their currency closely to the dollar (like some Caribbean nations), the benefit might be smaller. In contrast, Europe, Japan, and Southeast Asia often see steeper value shifts when the dollar strengthens.
A few years ago, I booked a trip to Tokyo when the yen was significantly weaker against the dollar—and that decision saved me hundreds. Sushi dinners that would normally cost $60 were closer to $40, and I even splurged on a last-minute day trip to Kyoto without blinking.
Pro Tip: Use real-time currency conversion apps when planning international travel. That little extra math could help you time your trip better or choose a destination that gives you more for less.
Imports and Consumer Goods: Hidden Discounts (and Some Drawbacks)
When the dollar is strong, imported goods become cheaper for U.S. consumers. That’s because foreign manufacturers receive the same price in their local currency while American buyers pay less in dollars. So you might not notice it, but your dollar stretches further at places like Costco, Best Buy, or Amazon.
Electronics, clothing, and cars often benefit the most.
Laptops assembled in Taiwan, luxury handbags from France, or German cars—when the dollar is strong, importing those products costs less. And those savings may trickle down to the consumer.
Grocery store surprises.
Even things like imported cheese, wine, or produce can be affected. If you’re seeing more French wine at great prices or New Zealand apples in stock, a strong dollar may be part of the reason.
But there’s a caveat: not every retailer passes savings along immediately. Some companies may maintain prices and enjoy higher margins, especially if they’ve already locked in inventory. Others may adjust gradually as they reorder from suppliers abroad.
According to Investopedia, a strong dollar typically helps reduce import-driven inflation. When the dollar buys more, it puts downward pressure on prices for imported goods—though other supply chain factors can offset that.
And what about exports?
Well, that’s the catch. A strong dollar can hurt American exporters because it makes U.S. goods more expensive for buyers in other countries. This can impact everything from farm products to manufacturing.
So while you might enjoy cheaper electronics, certain sectors of the U.S. economy—particularly export-heavy industries—can feel the squeeze.
Investing: What a Strong Dollar Means for Your Portfolio
This is where things get a little more nuanced. If you’re investing (through stocks, mutual funds, or retirement accounts), a strong dollar can affect both U.S. companies and international investments.
1. U.S. Companies That Export May Struggle
A strong dollar can hurt earnings for multinational companies. When they sell products overseas, their profits—earned in weaker foreign currencies—shrink once converted back to dollars.
Companies like Coca-Cola, Apple, and Nike often mention currency exchange rates in their quarterly reports for this reason.
So even if a company’s sales are strong, a powerful dollar can drag on revenue in U.S. terms—and potentially hurt stock performance.
2. International Investments Can Be a Mixed Bag
If you own international stocks or funds, a strong dollar reduces your returns when foreign earnings are converted back to dollars.
Let’s say you invest in a European mutual fund. Even if the stock prices rise in local currency, the gains may be offset—or wiped out—when you convert back to dollars at a weaker exchange rate.
But flip it: If you’re investing in foreign assets while the dollar is strong, and the dollar weakens later, your investment may benefit from favorable currency shifts down the road.
3. Emerging Markets Feel the Pinch
Strong dollars can spell trouble for emerging markets. Many of these countries borrow in U.S. dollars, and when the dollar strengthens, their debt burden increases. That can hurt local economies—and your emerging market investments.
It also means investors may retreat from higher-risk international markets back to U.S. assets, which can depress global stock performance.
Who Benefits (and Who Doesn’t)
Let’s do a quick recap of who tends to benefit from a strong dollar—and who might be quietly sweating:
Beneficiaries:
- U.S. tourists traveling abroad
- U.S. consumers buying imported goods
- Retailers importing and selling foreign products
- Investors buying international assets at a discount
Potential losers:
- U.S. exporters and multinational corporations
- Foreign companies selling to U.S. customers
- Holders of international investments (short-term)
- Emerging markets carrying U.S.-denominated debt
This doesn’t mean you should avoid international investments or only shop imported goods. But it does mean being aware of timing and currency dynamics can make you a savvier investor and consumer.
How to Make the Most of a Strong Dollar
The dollar’s strength ebbs and flows with interest rates, global confidence in the U.S. economy, and monetary policy. While you can’t control it, you can take smart steps to align your financial behavior with where the dollar stands.
- Travel smarter. Consider timing trips to places where your dollar stretches further. Watch exchange rates before booking.
- Shop with awareness. When the dollar is strong, imported luxury goods or electronics may be more affordable. Compare prices, especially on big-ticket items.
- Think globally in your portfolio. Consider how currency movements might impact your international investments. If the dollar is at a multi-year high, new international purchases might be better long-term bets than existing holdings.
- Diversify wisely. Don’t overreact to currency changes, but do consider them as part of your long-term allocation strategy—especially if you’re heavily tilted toward multinationals or emerging markets.
Wealth in Focus
A strong dollar gives U.S. consumers more buying power abroad. That means cheaper travel, better import prices, and more room in your travel or shopping budget.
Multinational companies may face headwinds. If you’re invested in companies with big overseas operations, a strong dollar could temporarily reduce their earnings.
Foreign investments are impacted by currency conversion. Gains made abroad may shrink when converting back to dollars—so always evaluate currency risk.
Emerging markets can become riskier. Dollar-denominated debt gets heavier when the dollar strengthens, which could hurt economies and returns.
Plan travel and large purchases strategically. Use periods of strong dollar strength to book trips or purchase imported goods—your wallet will thank you.
The Dollar Is Strong—Now What?
A strong dollar isn’t just an economic talking point. It touches your travel plans, shopping habits, and investment returns in very real ways. But like most things in finance, context is everything.
It’s not about cheering or fearing currency shifts—it’s about being aware, flexible, and thoughtful in how you respond.
Next time someone mentions a “strong dollar” in a headline or on your newsfeed, you won’t just nod politely. You’ll know exactly what it means—and how to make it work for you, not against you.
Because financial confidence isn’t just about what you know. It’s about knowing how to use that knowledge.
