U.S. Dollar Reached a 2.5 Year High Friday: What Does It Mean for the Economy?

| About: PowerShares DB (UUP)

The U.S. dollar index (vs. major currencies) hit a 2.5-year high Friday, reaching the highest level since April 20, 2006 (see chart above).

Update: What's so great about a rising dollar?
  1. Imports are cheaper. We buy almost $200 billion of goods from the rest of the world, but export only about $120 billion. Since our imports are greater than our exports, we have a net gain from a rising dollar.
  2. A strong dollar makes gas and oil (which is priced in dollars) cheaper. As I have reported, consumers save $1.42 billion annually for every cent that gas prices fall. Consumers will save more than $200 billion over the next year from the recent fall in gas prices, and part of that price decline and consumer savings is from the stronger dollar.
  3. The appreciation of the dollar suggests that inflationary pressures have eased for the U.S. economy.