Strong Dollar Could Hurt U.S. Companies

ByABC News
August 6, 2001, 4:32 PM

N E W  Y O R K, Aug. 7 -- It was a juicy little business picking and packing apples and other fruit from the fertile soil of north central Washington state's Okanogan Valley.

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The Regal Fruit Cooperative, one of the oldest in the region, did well taking the fruit of its neighboring farms' labor and packing it up to ship around the world.

At least until a few years ago, when the steadily rising U.S. dollar began to chomp away at profits.

Slowly but surely, Regal Fruit and other cooperatives like it in the Northwest began to see profits rot away as costs grew, margins shrank and other countries with cheaper currencies ate up market share for apples, apple juice and other fruits.

After more than 53 years, Regal Fruit is now slated to shut its doors once the final summer harvest comes in another victim of the dizzyingly strong U.S. dollar.

"The industry is in a freefall right now, in large part because of the strong dollar," said Ray Colbert, interim manager at Tonasket-based Regal Fruit. "Banks are foreclosing, people can't get financing. In 47 years, it's probably the worst I've seen it."

Strong Dollar Not So Fruitful

In the last 18 months the U.S. dollar has risen 12 percent against most major currencies as measured by a Federal Reserve currency index. The index measures all major currencies against the dollar. Last month alone, the index posted its highest value for greenbacks since July 1986.

While the strong currency is a surefire sign that international investors still have faith in the stuttering U.S. economy and its deflated financial markets, it is clearly having a negative impact on American businesses that can't compete with products readily available to consumers at discounted exchange rates.

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"As long as domestic demand was strong, I don't think firms really worried too much about the dollar," said Steve Cochran, senior economist with in West Chester, Pa. "But now, you'll take a sale anywhere you can get it."