COVID-19 Has Weakened the Dollar and What it Means for Consumers

by Emily Rotthaler-The ongoing pandemic has weakened the currency of the dollar. While that may sound dramatic, this will only affect the average person if the negative trend continues in the long term.

Due to the weakness of the US economy brought on by COVID-19, the dollar dropped 11% since it hit a peak in March 2020. According to measures by several broad dollar indexes, its value is now as low as it had last been in 2018.

While a weak dollar has a bad effect on imports, it does not directly affect the purchasing power of the average consumer, for example students, in the short term. According to Morningside College business professor Jeff Zink, imported products become more expensive.  

However, this is not very noticeable to the general public. Zink said, “People who are buying imports in dollars, and they’re paying Walmart in dollars or Target in dollars, don’t see those fluctuations all that much.” This is because intermediaries like Walmart or Target absorb most of the fluctuation of prices.

Zink mentioned that the weakness of the currency isn’t necessarily a bad thing. In other countries, American exports are becoming more competitive as they now cost less than before the pandemic. This results in more American products being sold which can even lead to the creation of jobs in the production sector.

A possible risk for the purchasing power of consumers in the long term is inflation, but that will only occur if the currency’s value doesn’t increase over the next five to ten years. Zink is confident, that the issue at hand won’t take quite as long to be resolved. 

Zink said, “It’s probably six months to two years before you finally see the US economy recover and the dollar not be as weak as it is.”

According to Zink, the stimulus checks and recovery acts coming down through Congress are already beginning to show an improvement of the economy. He is confident, that as soon as that “kicks into gear,” people will begin to spend more money on goods and services which will eventually strengthen the US economy.