Greenbacks still falling vs. Euro

Similar to the depreciation of an automobile, the value of every dollar in your piggy bank is deflating with each passing day. \nThe strength of the good 'ole greenback, in fact, has been steadily falling during the past several months when valued against the Euro and other world currencies, despite President George W. Bush's support of "strong dollar policies."\nThis means that one Euro is able to buy more and more American dollars each month. For example, the Euro is worth $0.254 more than it was two years ago. In January 2003, one Euro could buy $1.06; as of today, one Euro will buy more than $1.30 U.S.\nThe decline of the dollar abroad can be perceived as beneficial for the Hoosier economy despite the concern of some economists. The impact on the Indiana economy, however, remains to be seen.\nWillard Witte, an associate professor of economics, said it is good for some sectors of the economy and bad for others when the value of the dollar falls. Imports to this country, for instance, especially those from Europe, are more expensive. On the other hand, the reverse of this is also true because the dollar buys less abroad. Exports to other nations, particularly those in Europe, are more profitable to U.S. exporters. \n"It makes our goods cheaper abroad. And for exporters, since Indiana is a state that has a lot of exports relative to other states ... there's clearly some benefit there," Witte said.\nHe said manufacturing-based economies like Indiana's, as a consequence, will see a benefit from a weaker dollar as well. \nWitte said the Bush administration is probably glad to see the value of the dollar fall, despite White House claims to the contrary. He said Americans will be more likely to buy American-made goods over their more expensive imported counterparts because of the weaker dollar. \nThus, the consequences of a weaker American dollar might help reduce America's massive trade deficit. \n"Most economists would say that the ultimate cure to the trade balance deficit has to involve depreciation of the dollar," Witte said. \nThe United States had a nearly $550 billion trade deficit in 2003, according to the CIA World Fact Book.\nBut, the jury is still out on the direct impact of a weaker dollar on the Indiana economy. Many Indiana companies making transactions internationally have seen few affects of this trend. \nHaving manufacturing facilities in other countries allows Columbus, Ind. based Cummins Inc. to balance fluctuations in the value of the dollar.\n"For Cummins, foreign currency doesn't have a large affect or impact due to our operations worldwide," said Matthew Wasson, a member of the finance division of Cummins, "We balance the risks of currency naturally through our international operations."\nThe situation is similar for Indianapolis pharmaceutical giant Eli Lilly & Co. \n"Since we are a global company with operations around the world, we are not significantly affected because we are not reliant on any single market," said Terra Fox, financial communications manager for Eli Lilly in a statement.\nA weaker American dollar traditionally impacts travel to European countries; because the dollar will buy a smaller and smaller portion of a Euro, American money buys less and less in Europe. \nCaroline Richards, a travel consultant for International Travel, 1120 N. Walnut St., said she hasn't seen any weak dollar impact on her business. Though things in Europe might be more expensive, she said, travelers are adapting by either staying in less expensive accommodations or by purchasing package deals. \nKathleen Sideli, the director of the Office of Overseas Study, echoed Richards' sentiment.\nShe said students are reexamining the accommodations for their stays in Europe, but the devalued dollar isn't impacting their decision to go abroad.\n"For most students," she said, "Overseas travel is such an important component of their college lives that they are just making some trade-offs in how they spend their money."\n-- Contact Staff Writer Michael Zennie at mzennie@indiana.edu.