Why a strong dollar hurts companies outside the US

A European company selling into the United States earns dollars and converts them home. If the dollar is strong those earnings are worth more — that is the good side, and the market knows it.

The bad side is the mirror image: when the home currency strengthens instead, European products become dearer for Americans, who buy less or buy elsewhere. Revenue thins out before the accounts show any of it.

Many emerging countries and many companies borrow in dollars, because it is cheaper. If the dollar strengthens, their repayment stays identical in dollars but grows heavier in their own currency: they must earn more to service the same debt.

That is why a strong dollar pushes emerging markets down even when nothing has happened in those countries. The debt hasn't changed: what changed is the cost of repaying it.

Oil, gas, copper and wheat are quoted in dollars worldwide. If the dollar strengthens, anyone not paying in dollars finds them dearer with everything else unchanged — and that reaches industry, transport and eventually consumer prices.

This is why the exchange rate is not a specialist's topic: it is one of the few numbers that lands simultaneously on household bills, on company accounts and on the value of your portfolio.