In the basic definition of dollar strength — its worth in other currencies — this has been the dollar's best year in decades.
The U.S. Dollar Index, which tracks the dollar’s value against six major currencies, was up 17 percent at one point this year. In direct matchups with the British pound, the euro, the Japanese yen and the Chinese renminbi, the dollar is, likewise, higher than it has been in the last twenty years.
Recent global shocks, namely the war in Ukraine, have helped push up the dollar's value, since investors, companies and other countries often stow their reserves in dollars during tumultuous times. But the overriding reason for the strong dollar is the fight against inflation. The Federal Reserve is ratcheting up interest rates to attack the current near-constant rise in prices.
Multinational companies with headquarters in the United States are complaining that the dollar's strength is hurting earnings as repatriated profits from abroad, in euros, pounds or yen are worth less in dollars. The strength of the greenback also spells trouble for emerging economies who have to pay even more for imports bought in dollars and loans owed in US currency. US exports also take a hit as American-made goods become more expensive and less attractive to shoppers in other countries. Similarly, people living in countries where the currency is now weaker than the dollar will notice their visits to the States become more expensive, in turn negatively impacting US tourism.
However the dollar’s rise above other currencies cuts both ways. For companies that buy goods from overseas, purchases are less expensive. The euro's hit to parity with the US dollar means U.S. travelers can get better deals on hotel rooms and meals out when they travel to Europe, or anywhere else right now. For them, it's like the world is on sale. Similarly, those working in the US with residency in other countries (i.e non-immigrant visa holders) can benefit from the exorbitant exchange rate. If they are wishing to convert their hard earned dollars into their home currency, they will be able to buy a lot more than before.
Here’s a view of how the dollar compares to major currencies as of Nov. 2, 2022:
USD/EUR: One dollar buys €1.01 today, compared to €0.86 a year ago
USD/JPY: One dollar buys ¥147.09 yen now, versus ¥114.11 a year ago
USD/CHF: One dollar buys 1.00 Swiss francs today, compared to fr. 0.91 a year ago
USD/GBP: One dollar buys £0.87 now compared to £0.73 a year ago
USD/CAD: One dollar buys C$1.36 now, versus C$1.24 a year ago
To put that into perspective, below is a breakdown of what $1000 USD converts to today across these major currencies versus its value at the same time last year.
These enticing exchange rates coupled with tax exemptions for specific visa holders, makes the US very appealing for teachers and other young professionals interested in living and working in the US short-term to save money for a future in their home country.