Strong Dollar Strong Economy. Really?

Before I was studying Economics, I thought the strong currency means strong Economy. I was going to exchange offices and looking at the charts and making conclusions, `Oh, 100 Turkish Lira is 300 Swedish Krone.` and I was proud of my country economy. But when I started university, truth hit my face badly. Strong currency doesn't mean strong economy and actually it has disadvantages also.




Let's start with the advantages as always,

• Strong currency makes import cheaper for the country. Logically, when you are importing goods and services, usually you are using the import country's currency, when your currency stronger than the import country's currency, you are importing good cheaper, Okey, it is little bit confusing. Let me give you example; One US firm is importing Traditional Cottage Cheese from Poland. In Poland, $1 is 3 zl so if the firm wants to buy 9000 zl worth Cottage Cheese, they need to pay $3000. What if $1 is 5zl? US firm will pay instead of $3000, just $1800 to buy. Cheese is the same cheese, firms are the same but instead of $3000, the amount is $1800 this time.  This is the advantage of strong currency.
• Manufacturers can enjoy the cheap raw material from abroad. Suppliers in other countries will sell raw materials to the firm with the weak currency which means two things; Either buyers can buy more raw material with the same amount of money or the company can buy usual amount of raw material with the cheaper price.  In any case, it is a big advantage.
• As I mentioned before, imported goods will be cheaper for consumers. So, people can pay less for the goods and with the surplus money they can buy another things which can cause low inflation pressure.
• As advantage, we can say that as a tourist in abroad, strong currency has a positive thing. If your currency is stronger than the country's which you are in, you can spend less money to purchase goods and services as a tourist. 

Yes, it looks good. But what is the other part of the iceberg?

•  Exporting goods and services are getting harder. Another example is coming; Let's assume that one Polish firm wants to import goods from USA. When 1 dollar is equal to 3 zloty, they can buy $10.000 worth goods with 30.000 zloty. If 1 dollar increase 4 zloty, Polish firm has to pay 40.000 zl instead of 30.000 zl. so it will push Polish firm to search cheaper goods in the market.
• Strong currency will lead International Companies to reduce their profit. Companies who is earning their profits as a foreign currency, if the local currency is strong they can lose some part of the profit. How? Let's assume that one American company is running business in Poland again. If the firm is earning 12 million zloty, that means 4 million USD right? So let's assume that Next year, dollar increased against zloty and now 1 dollar is 5 zloty. And the firm made 15 million zloty. Actually firm increased the profit, but their profit as USD decreased from 4 million USD to 3 million USD. This can be really big problem between investors and company
• Tourism problem. Of course, if the country has strong currency, the visitors will decrease. Because this time tourists have to pay more than usual and country got expensive for them despite the fact that prices didn't change. 

Conclusion

Strong currency has bad sides and good sides. I strongly believe that strong currency has advantages and disadvantages depends on the people. If you are importer, yes this is good yet if you are exporter this is harmful for your business. If you are regular citizen of the country which has strong currency, you can go holidays to other countries which has weaker currency easily. All in all, it all depends the perspective that strong currency is good or bad.


PS; I use Polish zloty because the exchange rate against dollar makes numbers easier to calculate.