When foreign demand for US goods decreases, then people buy less of USD products which can skew the equilibrium dollar exchange rate.
What is the equilibrium dollar exchange rate?
The long-term exchange rate that equates a currency's purchasing power parity (PPP) in a scenario where all items are traded and markets are fully functional is known as the equilibrium exchange rate. According to the "PPP theory of exchange rates," such convergence would indicate that similar price levels should be seen internationally. The exchange rate that balances supply and demand for a specific currency relative to another currency is known as the equilibrium exchange rate. The market is cleared at this price.
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