Hard dollars: putting the devalued greenback to work

Like declining real estate or stock terms, the diminishing dollar is neither uniformly beneficial nor harmful. Consider Accor North United States, Inc., a division of Paris-based Accor, a global hotel operator. When the company needs extra funds, possibly to make an acquisition, the declining dollar comes in handy. "pickings advantage of the dollar devaluation means that it's cheaper to borrow from our parent than a bank," says Sir Leslie Stephen Manthey, senior vice president and financial officer with the Carrollton, Texas-based firm. This is because the parent company's euros now are more valuable than they were a year or two ago.

On the other hand, "we have more pressure level on consequence," Manthey says. "If we're devising money, we can't send it back to our parent, because the dollar/euro ratio is so weak. We're handcuffed to the currency." For illustration, although Accor sold its Red Roof subordinate in Sep 2007, netting about $400 1000000, Manthey since has kept the funds in the U.S. "It's not worth pickings the hit. A good solution is to expeditiously use the working capital in the U.S.," possibly by devising an acquisition, he says.

"In my view, the dollar's decline is both a plus and a minus for us," Manthey says. This is the case more loosely, as well. Exporters typically do well when their currency drops, as their merchandise become more competitive outside their home marketplace, says Animesh Ghoshal, prof of economic science at DePaul University, Windy City. Conversely, importers take a hit, as the costs of their goods or stuff rise.

To be sure, the idea that the dollar is falling doesn't ever go over well. "People think of a strong dollar like a strong body," says Dean Baker, co-director of the centre for Economic and Policy Research, an independent research group in Washington, D.C. "But, there's no particular virtue in having a strong dollar."