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julies Apr 28th, 2006 09:12 AM

Anyone else notice the dollar plummeted this week against the euro?
Good news for those of you coming from Europe to the US. Bad news for those of us going to Europe from the US. I wonder if this is the beginning of a trend.

1 EUR = 1.26206 USD 1 USD = 0.792353 EUR

It had been fairly stable at closer to
$1= E .82 or .83 for quite some time.

Budman Apr 28th, 2006 09:15 AM

Yes, I've been watching as the cost of my trip has gone up over the last week or so by 3-4%. Oh well, I'm still going, and not trying to think about it. ((b))

laartista Apr 28th, 2006 09:21 AM

I hate to sound stupid but why is that? Does it have to do with oil prices? Most European economies are not as strong as the U.S. and they have higher unemployment rates so why does our dollar fall/ Is it related to our deficit/ Anyone care to give me a quick econ. lesson?

tod Apr 28th, 2006 10:36 AM

julies - If our Rand/Euro exchange rate ever got to your equivelant of Euro/dollar I would not only be able to hop over to Paris anytime I liked - I would probably buy an apartment of my own and let all my friends take a holiday too!
Today I'm paying R7.70 plus some small change - so please don't complain. Feel extremely lucky you have it so good!

TexasAggie Apr 28th, 2006 10:46 AM

We leave tomorrow for Greece and I've watched the price of our trip rise about $50 for every penny the dollar loses to the €. Oh well... best to just live with it rather than get upset

logos999 Apr 28th, 2006 10:58 AM

The huge! US trade deficit is financed by borrowing money from abroad. (Buy foreign goods and pay for them with money those foreign people lend you). Non US people and institutions lend money and want to earn some interest from it. In order to attract those people US interest rates are higher than in other western economies (€ zone included). The fed "announced" rates will no further increase, but rates in Europe are on the rise. So sell your $$ investments and buy something else which earns more interest.
btw. It's the $ that is weak against many other currencies. The € is unchanged against those currencies. This time it'll reach 1.40 USD per 1€ I hope :-)

Neopolitan Apr 28th, 2006 10:58 AM

Well I started planning this summer's two month trip about a year ago. One year ago today, the euro was $1.29, so we still have a little way to go before it is as expensive as when I started my planning. I just had a false sense of it being better for a while in between times.

By the way, I don't call 2 to 3% over a two week period "plummeting".

MaureenB Apr 28th, 2006 11:10 AM

Seems like the euro was $1.32 when I was planning my first trip to Vienna, over three years ago. And it's been lower than $1.26 this semester, which helped us.
But since I leave soon for Italy, I hope the dollar doesn't move much lower!
Maybe this happens when Europe's tourist season approaches every year?

thefirstme Apr 28th, 2006 11:27 AM

<<<I hate to sound stupid but why is that? Does it have to do with oil prices? Most European economies are not as strong as the U.S. and they have higher unemployment rates so why does our dollar fall/ Is it related to our deficit/ Anyone care to give me a quick econ. lesson?>>>

My guess at what the US is trying to do is devalue in hopes of reducing the current trade defecit, or at least hoping to not let it keep expanding. It's a really basic explanation but the neo-classical economics go-to approach in reducing a trade defecit is to devalue your currency. If you can pull off a real devaluation (not just nominal) then your goods are less expensive compared to what they were, which means you export more. In turn, imports are relatively more expensive, you you import less. Trade defecit reduced.

Remember though, if I knew exactly what the Fed was doing I'd be a very rich man!

Alec Apr 28th, 2006 11:54 AM

Reasons for the fall of dollar against major currencies (including euro) in the last two weeks:
Fed chairman hinting a pause in rate hike.
Drop in US inflation, lessening further rate rise.
Likely rate hike by European Central Bank.
Other central banks diversifying their foreign currency reserves out of dollar - Swedish central bank selling dollar and buying euro.
Strength in Asian currencies, with unexpected interest hike by China.
Continuing tension between Iran and US.
Higher oil prices hitting growth prospect.
Plus the perennial problem of current account deficit.

As for what may happen with dollar in the next quarter, nobody knows but currency market is looking towards next target of $1.30 to a euro.

laartista Apr 28th, 2006 12:44 PM

Thanks for the explanations

Jolie Apr 28th, 2006 12:46 PM

Rats. The pound is already out of my budget, and now the euro is getting expensive again. I wish I could find a cheaper obsession.

I would take up golf, but with my luck as soon as I do, Taylor Made products will shoot up in price.

Neopolitan Apr 28th, 2006 01:31 PM

I wish people would stop looking at how many euros or how many pounds you get for a dollar. What they should look at is what you can buy for those euros, pounds or dollars. People seem obsessed with the idea that they get fewer euro for their dollars than at some other time, and fail to consider the bottom line cost.

Look at it this way. Can you get a really nice hotel in New York for $150? NO! Can you get a really nice hotel for $150 in Rome or Paris? YES! Can you buy a good bottle of Bordeaux at a nice restaurant in Los Angeles for $15? No way. Can you buy one for $15 at a nice restaurant in Paris. Absolutely. So why focus on the fact that the wine is only 12 euro but 15 dollars, when it is such a bargain? Why worry about whether the room is 120 euros but that is $150? Why not just look at what you can get for your money? In my estimation, traveling in Europe is still a lot cheaper than comparable travel in the US. As I get ready to spend 10 days in NYC before heading to Europe for two months, I know full well that those first 10 days are going to be far the most expensive days of the entire trip.

People continue to be obsessed with some misinformed idea that a euro is supposed to be equal to a dollar and if it isn't, then things are too expensive.

If there was a country called LalaLand and they had a currency called the LaLa and it cost $5 US dollars to get each LaLa would that mean that things were expensive there? Not necessarily. Let's say the hotels charged 1 and 1/2 LaLas a night. That means it cost Americans $7.50 a night. Wouldn't that be great? Or would people still be obsessing because their dollar would only buy them one fifth of a LaLa and they'd still whine about how little their dollar was compared to the LaLa? Extreme example, but exactly the same thing!

thefirstme Apr 28th, 2006 01:44 PM

Neo, I see where you're coming from. Some people do just fret about the fact they get a lower nominal number of euros. Its an extreme case of a child who would sell you his dollar bill for three quarters because he gets more things!

BUT, take your case in Lala Land. Hotel prices within lala land stay at 1 1/2 lalas, at least in the short term (sticky prices). Now imagine that the exchange rate moves from $5/ lala to $10/ lala. Yes, $15 for a hotel is still good, but only yesterday you could have stayed two nights for that price. So there is a reason to complain about devaluations.

xyz123 Apr 28th, 2006 01:46 PM

Currencies go up, currencies go's a never ending cycle and while bad for travellers might be good for the economy.

One, certainly not the only factors, is interest rates. When US interest rates were at all time lows what did it mean? It meant for example mortgages were much less expensive, good for home owners, right...but of course it meant that people would not be as likely to invest in US fixed income paper where they were getting a meagre return so they would invest in other countries' paper, result, US dollar goes down, bad for travelling, right? but good for home owners? good for selling US goods overseas as they are less expensive yada yada yada..

Some people think the value of a currency being high is a symbol of strength of the country...all the figures show the US economy is booming, the stock market is approaching highs ever since the 9/11 troubles yet the dollar is means a trip to Great Britain is more expensive (the pound passed $1.82 today), absolutely. Butis that good for Brits? Well it is if they travel to the US but it also means their goods are more expensive to sell in the US..perhaps the British equivalent of the Federal Reserve is happy where sterling is....if so they don't do anything. If they think sterling is too high against the dollar there are steps they can take.

The fact is the cost of currencies when travelling is one of the least important factors in determining where a currency should is what it is. Six months from now it is possible it will cost $1.50 for €1...or it might cost $1.10 for €1...there isn't a thing in the world you or I can do about it.

So we live with it and do what we can do to minimize our costs when we are overseas and that's the way it is and has always been and will always be.

Luisah Apr 28th, 2006 01:51 PM

How many euros can I get for 100 LaLas?

ilovetotravel29 Apr 28th, 2006 02:01 PM

<font color="blue"> Damn! now I am going to see if I can split 500 bucks for 2 weeks in Europe...sigh.....</font>

cadillac1234 Apr 28th, 2006 02:13 PM

Of course it did...

I'm leaving in 12 days for Europe and I'm paying cash for all the apartments I'm staying at except 1 :(

oobylicious Apr 28th, 2006 02:53 PM

I'm paying in lalas, so I think I'll be fine. But I'm bringing some monopoly money as back-up, just in case!

Either way, next week, I'll be in Europe! I'm pee-my-pants excited!

Neopolitan Apr 28th, 2006 03:31 PM

Too bad, oobylicious, those Depends are so bulky and take so much luggage space.

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