Fodor's Travel Talk Forums - Currency query -- What ho, Euro?

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Currency query -- What ho, Euro?

Okay, forumers -- someone explain: The US dollar is quoted at 1888. lira and 1.02 Euros today. But the Euro is quoted at 1936. lira, which I thought was fixed at the inauguration of the Euro. In theory, therefore, some sort of electronic transaction by which one put one's dollars into Euros and then into lire would make you about $5. per $100 converted. Can someone make sense of this and/or tell me if any transactions are currently (so to speak) taking place via the Euro or is it still a typographic figment of someone's fiscal imagination?

I just checked the numbers on Yahoo Currency Converter (probably not perfectly accurate, but close enough) and found: $1.0251 = 1 Euro $1 = 1888.12 Lira 1 Euro = 1936.27 Lira So if I bought $100 worth of Euros, I'd get 97.5515 Euros: $100 X (1 Euro / $1.0251) = 97.5515 Euros And then bought Lira: 97.5515 Euros X (1936.27 Lira / 1 Euro) = 188,983.51 Lira Converting $100 directly into Lira, I'd get: $100 X (1888.12 Lira / $1) = $188,812 Lira. So, in this example, you're 0.1% worse off converting directly from Dollars to Lira, but you'd more than make up for it reduced transaction expenses. The tiny difference between the 2 conversions is most likely due to tiny variations between the markets for Dollars to Lira and Dollars to Euros (because you're right, Euros to Lira is fixed).

Checking the Interbank rate at 4:24PM CST today (7 Dec, 1999) I get .9853 euro per dollar and 1,907.84 lire per dollar. The _fixed_ rate for lire to the euro is 1936.27. 1907.84/1936.27 = .985317 ... right on the money. No profit to be made here. I believe the 1.02 you quote is probably $1.02 per euro rather than the other way around. Also appears you're using something other than the Interbank rate. THe Interbank rate is only valid for, typically, exchanges on the order of $1,000,000 or more, between banks. Otherwise the rate will also include a discount (charge) depending on whether you're buying or selling and where.

P.S. For those new to the euro, you'll find http://twenj.com/euro.htm a helpful primer.

You people are great, but do tell me who is conducting any transactions re:the Euro -- just financial instit's, right? It's still on a par with the Easter Island heads -- no one holds a Euro in hand or trades anything other than numbers on an accounting sheet? So I couldn't actually convert to Euros unless I were going to reconvert to something else?

The Euros will not be used for another year or two. Until then, you'll be dealing in the established currency in each country (i.e., lire in Italy, franc in Spain, etc.).

On previous posting, I obviously mean francs in France, not Italy. Sorry.

Portia, true enough ... to a point. But then, dollars, francs, lire, marks ... all really notional without tangible value. They're really little different than poker chips. Hard to turn into food in the jungle. In fact the euro notion is useful in many ways. For example, traveling through many countries it's now quite easy to compare prices, with most shops showing prices in euros as well as local currency. As well, with the euro conveniently and advantageously (to North Americans) now quite near par with the dollar, as many prices are posted in euros, approximate translation to US dollar equivalent becomes much easier for mathematically challenged travelers who seem often to be boggled by the question of, "What is 1,500,000 lire 'worth' in 'real' money?" Also, Portia, there are many, many people in Europe and the UK who now have checking accounts denominated in euros. Quite convenient for those who often travel about the eurozone. And, by the way, if you have a checking account or savings account, it's just numbers on an accounting sheet. I'll be happy to take your numbers off your sheet anytime you'd like. :-)

To clear up some confusion... The euro / $ rate is always quoted as dollars per euro. A rate of 1.02 means that is how many dollars it takes to buy one euro. That means it is approx. .98 euora to buy one dollar. The legacy currencies such as lira are quoted as legacy currency / dollar. A rate of 1888 means it takes 1888 lira to buy one dollar. Its a little confusing, but that is the way the Europeans insisted at the introduction of the euro. I think they believed it would become the new standard currency. Right now, as the euro loses value, they appear to have a little egg on their faces.