The role of foreign currencies in BLS import and export price indexes

Companies face unique challenges when they decide to partner with foreign businesses to produce and sell their products. One of those challenges is answering the question, “With what currency should we conduct our trade?” Although the U.S. dollar is considered the world’s foremost trade-invoicing currency, U.S. firms do occasionally contract in a foreign currency when they import or export merchandise goods.¹ The U.S. Import and Export Price Indexes (MXPI) track the average change in prices of such transactions and will accept pricing data invoiced in foreign currencies, although the prices are first converted to U.S. dollars in order to incorporate them into the price indexes’ calculations. This article provides a snapshot of the currencies reported by U.S. establishments that participate in the MXPI survey and explains how currency exchange rates affect prices and price indexes. Starting in 2025, exchange rate related data for some price indexes are no longer available with the inclusion of a new data source.² This data source replaced directly collected prices with administrative trade records that do not provide currency information.

Foreign currencies and the MXPI

The U.S. Bureau of Labor Statistics (BLS) import and export price indexes represent price trends in detailed and top-level products and industries in the U.S. economy, without revealing the private information of participating establishments. Price indexes that track international trade must account for the exchange rates between the U.S. dollar and the currencies of trading partners. BLS does not regularly publish currency data, but BLS collects currency data because they are an integral part of MXPI survey data collection and price index calculations. When establishments report the cost of an item, those who report prices in U.S. dollars have already accounted for exchange rate differences. For the establishments that give prices to BLS in foreign currencies, BLS must convert the price into U.S. dollars to calculate the price indexes.

All prices must be in dollars to be used in the calculation of the MXPI.³ Although a dollar price is the preference for the BLS survey, establishments may report transaction prices in a foreign currency when they cannot provide a dollar price. BLS converts all nondollar prices to dollars by applying the average monthly exchange rate with the dollar for the most recent month. For example, if an importer reports that they paid 100 euros in June, the monthly average of the daily exchange rate between the euro and dollar for May will be applied to convert the 100 euros into dollars for the June import price index.

The sample selection process to identify representative traders for MXPI does not account for currency used in trade, whether the currency is domestic or foreign. Nor do foreign currency invoiced items make up any large portion of the price indexes, as shown later in the article. Currency information collected from establishments in the process of calculating the MXPI is a byproduct of the data collection, called “paradata.” Analysis of these paradata adds to the understanding of direct and indirect impacts of how foreign currency exchange rates with respect to the dollar affect MXPI movements.

There are many business considerations behind the dollar price of an international transaction. All else equal, the appreciation or depreciation of an establishment’s preferred currency compared with its trading partner’s currency could translate to either an increase or decrease in the dollar price. Exchange rate fluctuations also affect the monthly price in both direction and magnitude when the trade is recurring. Some trading partners use a fixed exchange rate that is renegotiated from time to time. Others agree to a semifloating exchange rate that is a calculated average. Another option is to select the closing exchange rate on a given date before the transaction occurs.⁴

When viewed from an economy-wide perspective, the price-determining impacts of these individual decisions on which currency to use for invoicing a purchase or sale are called “exchange rate passthrough.” Economists and researchers interested in trade investigate how exchange rates, currency invoicing, and price changes impact price levels between countries. Several academic articles use MXPI survey data to study the passthrough effect and other international and domestic price and inflation movements.⁵

The U.S. dollar versus foreign currencies

The dollar’s dominance as the currency of choice for international businesses in the United States is reflected in the paradata for the MXPI survey. In the MXPI, the average portion of trade transactions invoiced in dollars never fell below 94.7 percent between 2016 and 2024. As shown in chart 1, dollar transactions were a consistently larger share of exports, averaging 96.2 percent, than imports, averaging 95.2 percent, over the period. Despite the general downtrend for imports that began at the height of the pandemic in 2020, and in the previous year for exports, the dollar remains the most reported currency among the MXPI prices.

The five import and export major merchandise categories showed some noteworthy differences. Of the sectors (foods, feeds, and beverages; industrial supplies and materials; capital goods; automotive vehicles; and consumer goods), the import consumer goods price index generally reported the highest portion of dollar-invoiced transactions, averaging 96.5 percent, and inversely, the export counterpart consistently held the lowest portion, averaging 91.6 percent. (See chart 2.) A notable shift was within the export automotive vehicles price index, with a consistent increase in the share of dollar transactions between 2016 and 2020, from the second-lowest share to the highest share.

Chart 3 presents foreign currency transaction shares for all sectors between 2016 and 2024 compared with all transactions recorded in the MXPI survey, based on the top five foreign currencies reported in 2024.⁶ The euro was consistently the most common foreign currency price reported for imports, averaging 2.8 percent over the period, and the second most common for exports, averaging 1.1 percent. The most visible differences between imports and exports are the absence of the Swiss franc from the list of top export foreign currencies, which ranked 19th in 2024, and the absence of the Mexican peso from the list of top import foreign currencies, which ranked 6th.

Foreign currencies’ impact: direct versus indirect effects

As described in previous research, currency appreciation (when the value increases over time) results in a lower effective price for imported goods; currency depreciation (when the value decreases over time) results in a higher effective price for imported goods.⁷ For exports, the effect is the reverse.

There are both direct and indirect effects on the published import and export price indexes because of exchange rate fluctuations and the degree to which domestic and foreign exporters “pass through” (raise or lower prices in response to a fluctuation) the relative price change. The impact foreign currencies have on the MXPI can best be understood by an example: U.S. importers buy goods from the fictional country of Ruritania, and the prices they pay between the months of May and June change because of exchange rate fluctuations between the dollar and the fictional currency of the name "rur."

The following conditions hold for all of the upcoming examples: The rur appreciates against the dollar by 10.0 percent between April and May, and the only factor impacting price changes is the change to exchange rates. We also assume the Ruritanian suppliers and the U.S. importers account for the 10.0-percent appreciation in May when determining and converting their June prices, respectively. Table 1 shows the prices and how they change, comparing what is paid, what is reported, and what is used in the import price index (MPI) calculations.

Direct effect (BLS conversion)

The direct effect of a change in the value of the dollar against another currency occurs when the importer buys a product in the foreign currency and reports the foreign currency price. BLS converts the foreign currency price into dollars based on the most recent month’s average exchange rate, and thus exchange rate fluctuations between months are accounted for in the currency conversion.

In the importer’s first transaction, the first Ruritanian trade partner does not change the rur price between May and June, charging 100.00 rurs in each month. The importer reports the same rur price to BLS both months, and each month BLS converts the rur price to dollars before it is used in the MPI calculation. When the rur appreciates 10.0 percent from one month to the next, the full rur appreciation is applied to the June price, resulting in a $110.00 price. This increase is the direct impact foreign currencies and their exchange rates with the dollar have on prices used to calculate the MXPI.

Indirect effect (reporter conversion)

The indirect effect of an exchange rate change is the impact on prices reported in dollars, when the importer calculates their own currency conversion of a foreign currency purchased import. The next examples show an importer facing a different rur price in June based on how their three Ruritanian foreign trade partners pass through the rur’s appreciation into the dollar price. The foreign suppliers’ price strategy and the importer’s currency conversion affect the dollar price that is ultimately reported to the BLS to calculate the MPI.

Reported price change with complete passthrough

The importer’s second Ruritanian trade partner chooses to completely pass through the exchange rate change into their price, which results in the importer paying the same rur price for the import, but facing a higher dollar import price once converted. The importer reports they paid $110.00 in June, up from the $100.00 reported in May. The effect is that a 10.0-percent increase feeds into the price index calculation. This leads to the same result as the direct effect example, with the main difference being that the reporter is doing the conversion between currencies instead of BLS doing the conversion.

Reported price change with no passthrough

The importer’s third Ruritanian trade partner chooses not to pass on any exchange rate change and thus completely offsets the currency appreciation by charging a lower price of 90.91 rurs in June compared with 100.00 rurs in May. When the importer pays the lower rur price and then converts that price to dollars, the reported price for June is the same $100.00 as in May. In effect, the foreign trader receives less and the importer reports no change to the dollar price used in the MPI.

Reported price change with partial passthrough

Finally, the importer’s fourth Ruritanian trade partner chooses to pass through only half of the currency appreciation to the price. In this case, the Ruritanian partner reduces the rur price by 5.0 percent and charges 95.45 rurs, a drop from 100.00 rurs in May. When the importer converts the rur-priced item to dollars, the reported dollar price changes from $100.00 in May to $105.00 in June. So, the importer pays five dollars more, and the effect is a 5.0-percent increase in the price index.

These fictional examples provide insight into some of the ways a single foreign currency and its exchange rate with the dollar can influence the price trends of the MXPI. Real-life scenarios are not as simple. For example, domestic traders or their foreign partners may calculate or apply exchange rate measurements differently from the approach used for MXPIs, may apply exchange rate changes to prices on a nonmonthly basis, or may use the invoicing currency as a negotiation factor when setting a price. To further complicate analysis of exchange rate related influences, nonexchange rate related pricing factors can occur in tandem with currency fluctuations, sometimes offsetting or bolstering the exchange rate impacts.

The future of MXPI and foreign currencies

The survey paradata on foreign currency analyzed here were reported for all prices of merchandise goods collected via the MXPI survey through January 2025. Beginning in 2025, millions of administrative trade records replace thousands of directly collected prices from establishments for one-third of goods traded. With the change to the new data source, prices for imports and exports are reported in dollars. All MXPIs for foods, feeds, and beverages and industrial supplies and materials prices moved to using prices from the new data source. This major innovation in the MXPI concepts, sources, and methods expands the number of published price indexes by more than 500 because of the massive increase in the quantity of price data.

This change in source means that there will be less paradata on the currency choice of import and export transactions. Despite the loss of detail reported on the currency used for invoicing U.S. trade, exchange rate fluctuations will continue to be evident in price trends. For the product areas whose prices are extracted from the administrative records, only indirect effects from exchange rate fluctuations will be captured as U.S. importers and exporters report their prices in dollars. The loss of currency reporting in the survey data is offset by the greatly expanded availability of published MXPIs.