Hello and welcome to Moneygirls quick and dirty tips for a richer life.

Today's topic, diversifying into other currencies.

A listener named Dave emailed me with this question.

How is the US dollar valued on the international market?

Why does the value fluctuate?

And more importantly, why is the US dollar now in a free fall?

I'm a US citizen living in New Zealand. I often transfer funds from

the states to New Zealand. With the value of the dollar falling, which is

correlated to the New Zealand dollars rise, I experience a monetary disadvantage with each transfer.

Thanks for the questions, Dave.

The US dollar is falling and it's especially noticeable to US citizens traveling or living outside of the United States.

Measured against a trade-weighted basket of other currencies, the dollar has lost a quarter of its value since 2002, and 6% since August.

When the dollar falls relative to other currencies,

the prices of imports in the US go up,

and the prices of US exports go down, creating more demand for US goods that are sold overseas.

A weak US dollar means that your money doesn't buy you as much when you're traveling or living abroad

and converting US dollars to other currencies. A friend of mine from Ohio

who's living in Oxford, England recently emailed me to say how much more she would be enjoying life there

if things weren't so much more expensive than what she's used to. A weak US dollar

can mean paying five dollars for a coffee in Paris or $100 for a dinner for two in Auckland.

Ouch!

For the most part, currencies aren't fixed but fluctuate or flow relative to one another.

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