We're always told what the implications of a strong dollar are but is it true?

While getting ready for the NY Fed Empire numbers I came across a supplementary survey on the exchange rate run last month. A similar survey was conducted in January

Survey firms were asked a few questions on currencies and their effects on their businesses

The funniest part was that it was sub-titled "Strengthening Dollar Hampering Manufacturers", while in one of the questions on how changes in exchange rates have affected businesses, the majority answer was that they hadn't :-D

Here's the summary:

  • Manufacturers 10% of revenues came from exports over the last 12 months, down from 14% in Jan
  • Service firms said 8% came from foreign customers (virtually unchanged from Jan)
  • 72% of manufacturers, 50% of service firms said some revenues come from abroad
  • Manufacturing: Dollar having the most effects from FX moves came against (in order), EUR, Yuan and CAD (CAD was the top choice in Jan)
  • Services: EUR stood out in front as having the greatest effect
  • Majority of both sector respondents said that the strengthening dollar had no effects on aspects of business

This is a very small slice of the manufacturing and services sectors so perhaps we shouldn't use this brush to paint the whole picture, but it does show that the strong dollar isn't such the headwind that some at the Fed make out. Particularly for manufacturing, the effects can even be positive for those heavily reliant on imports of goods and materials as they become cheaper

The talking heads would have us believe that USD strength is hugely bad for the economy. This report is from the proverbial horses mouth and says different. It's apt to remember that there's two sides to the currency tale and it's important to not just concentrate on the negative slant, nor fully believe those who take that side of the argument up

There's also context to consider. Take a look at the long term chart of USDJPY and then try to work out where we are in terms of currency strength

USDJPY over 50 years - Strong or not?

Here's the full NY Fed survey