The United States Dollar Essay example

The United States Dollar Essay example

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The United States Dollar Index, otherwise known as the DXY, is a general measurement of the value of the United States dollar bill (Marotta, 2015). The DXY calculated by averaging the exchange rates between the United States currency and the six major world currencies (Marotta, 2015). These currencies are the Canadian dollar, Pound, Krona, Euro, and Franc (Marotta, 2015). The DXY is an indicator rather than a true value, the numerical value is only relevant to its relation to the other currency values (Marotta, 2015). Because General Electric’s international business emphasis resides in Europe, the DXY is an inaccurate measure of General Electric’s operations internationally. A more appropriate tool would be the foreign exchange rate between Euros and U.S. dollars. The DXY is an index including multiple currencies, while the foreign exchange rate only compares the U.S. Dollar to the Euro individually. The effects of a stronger U.S. dollar value in comparison to the euro, Brazilian real, and Canadian dollar decreased revenue by 4.9 billion dollars between 2014 and 2015 (General Electric, 2015). General Electric was negatively impacted by the volatility in foreign currency exchange rates because of the high volume of foreign businesses; this is due to the long-term contacts established in multiple foreign countries (General Electric, 2015). While long-term contracts suffer, there are clear benefits towards the weak value of the Euro, such as purchasing raw materials abroad.
Because the U.S. dollar is stronger than the Euro, it is advisable to purchase raw materials in Europe rather than the United States. This is because the materials would be cheaper to purchase due to the lower Euro value, but whether or not it would be lower cos...

... middle of paper ... acquired in order to make G.E. more competitive in global markets and helps off-set the decline of oil prices (General Electric, 2015). Overall, due to the high value of the dollar, it is advisable to begin expanding G.E.’s global markets and in-house production options (General Electric, 2015).
In order to expand, G.E. should consider retaining profits from revenue gained in Europe because of government intervention (General Electric, 2015). By keeping this revenue in Europe, G.E. can avoid corporate taxes and use this revenue to stimulate growth in their oil and gas division (General Electric, 2015). If there is slow growth in the global market, G.E. may be subject to losses due to the 55% revenue share being attributed to the global market in 2015 (General Electric, 2015). This means it is the responsibility of the company to redouble efforts in global markets.

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