Where currency shows up in real life: Prices, profits, and the economy

When the dollar strengthens, U.S. consumers often feel it first through the price of imported goods. The math is straightforward: a German car priced at €50,000 costs $60,000 when the exchange rate is $1.20 to €1, but the same car costs $45,000 if the dollar strengthens to $0.90 to €1. That kind of shift can make imports feel like a better deal, even when the item’s price in euros never changes. Examples like this help explain why currency can influence everyday purchasing power, not just portfolio statements.

A stronger dollar can also weigh on large U.S. companies that sell abroad, because those overseas sales translate into…