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A US importer who owes and Belgian company 500,000 Euros payable in 30 days from today expects that the US Dollar will weaken during this period. What would you advise the importer to do? What would happen if the imported took your advice yet instead of the dollar weakening, the dollar actually strengthened?

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Answer 1

I would have to advise the reporter to get as much maximum profit as possible. In order to effectively achieve this the importer would need to gain a higher percentage of profits in order to pay the Belgian Company within the 30 days. Things change within the financial market so the importer should stay focused on the profits rather than if the dollar will be weak. Wolla stated that the term “weak” and “strong” is misleading to many as they believe that an appreciating currency is better for the economy. If the importer focuses on the dollar being “weak” then becoming “strong” he would lose morale.

If the importer were to take my advice and the dollar got strong rather than becoming weak it is likely that he may be placed in a position to repay the money. According to Wolla, if there is an increase in the supply of the euros in which consumers, as well as companies, bring to the market this will decrease the value in relation to the U.S. dollar

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