Benefits of a Weaker Dollar
Boosts foreign demand while keeping US consumer demand domesticIncreases the competitiveness of US goods, benefitting the sales of US corporations and manufacturing activity. Reduce the trade deficit, translate into more jobs and stronger consumer spending.Helps the US tourism industry and merger and acquisitions. How? The declining dollar is a concern for foreign investors who already hold dollar denominated assets. On the other hand, for investors who are looking to gain exposure to U.S. investments, a cheaper currency makes US corporations more attractive acquisition targets.

Therefore in this current environment, it is hardly unlikely that the US government and the Federal Reserve will stand in the way of further dollar weakness as it helps more than hurts the US economy.

Disadvantages of a Weaker Dollar

Inflation. How? As a direct result of the dollars weakness, oil prices have risen, odediently followed by other commodities. Although inflation is always a problem, if it comes at a time when consumers cannot handle higher prices and when the central banks policies could drive runaway inflation, it is even more brow raising. Since a very strong correlation exists between oil prices and consumer prices, if the dollar continues to fall, inflation will continue to rise. The risk however is when inflation gets out of hand the central bank responds with tighter monetary policy. Raising costs of foreign goods and international travel.