Weak Dollar Could Boost Consumer Costs

The foreign exchange markets may seem irrelevant to most Americans. But the latest plunge in the dollar to new postWorld-War-II lows is renewing a more familiar topic: Fear of higher inflation.

Several economists said Tuesday that the weak dollar could nudge up prices on some popular consumer items. Gasoline prices may edge higher. Car imports could cost more. A vacation in Frankfurt already is more expensive.

Don’t start stocking up on gas cans, though. Financial experts caution that any effect from the dollar’s roughly 20 percent tumble against the German mark and Japanese yen this past year - 7 percent in the last week alone - probably will be minimal.

A key reason: The dollar has simultaneously strengthened against other key currencies, notably the Mexican peso and the Canadian dollar.

“It will have some effect. There’s no question. But the effect will be small …,” said Sandra Shaber, an economist with WEFA, a consulting firm in Bala Cynwyd, Pa.

In one of the first significant consequences of the dollar’s weakness on consumer prices, Saudi Arabia, the world’s largest oil exporter, this week announced the cost of oil exported to the United States is going up. Some analysts said the move could show up as higher gasoline pump prices in this country within the month.

“It is very obvious the reduction in the value of the dollar is really pinching the oil exporters,” said George J. Gaspar, an oil analyst at Robert W. Baird & Co. Inc., a Milwaukee investment firm.

He predicted an increase of about 2.5 cents per gallon in gasoline prices as a result of the Saudi action.

The weaker dollar already is causing subtle forms of inflation in other ways. U.S. travelers to Europe, for example, are paying more.