exchange rate
 

Is it expected to go down anytime soon? We are thinking of making a trip in October, but if it continues to go up, I think we will be looking elsewhere.

Is it at the highest it has been since WWII, as I've heard?

Nobody knows which way the exchange rate will go. My own GUESS would be that much of the change in relative value between the Euro and the dollar has probably already occurred, in terms of the rise in the value of the Euro against the U.S. dollar. It is NOT the "highest" it has been since WWII and not even since the mid-1990s.

If you read the business section of newspapers you'll see that despite the increasing concern by European financial officials about the continued drop in dollar value which could tigger a massive stock and bond sell off has apparently not concerned US officials who continue to pursue the so-called "weak dollar" strategy. This keeps our exports cheaper to buy and also makes foreign investment in this country more appealing. However, as European goods become more costly the pressure will rise to stem the dollar's decline.
Supposedly this has not "hurt" tourism from here to Europe but we'll see...

This has very little to do with what America does: it's not Americans who are selling dollars.

The important thing is whether the Eurozone will change its interest rates: it's the premium Eurozone interest rates have that's causing the Euro to be overvalued. And all the evidence is that the European Central Bank won't, because its constitution mandates it to concentrate on keeping inflation down (which economic orthodoxy tells us is done by keeping interest rates high). It is explicitly NOT required to concern itself with economic growth.

Follow what emerges from the G7 economic ministers' meeting that's going on in Boca Raton. If the Eurozone reps keep on blaming the US, that's a sign they're going to keep their rates high. Whatever that means for European exports and, trivially, for tourism.

If the issue is important to you, don't go to Europe. But this might be a great time to visit a country that's tied its currency to the dollar - like Hong Kong, Malaysia, UAE or Vietnam

As already noted, no one has a crystal ball to forecast what will happen to exchange rates. But it is a fairly unanimous conclusion of most financial "experts" (whatever that means) that interest rates in the U.S. will begin to climb later this year. When that happens, the euro to dollar exchange rate will improve in favor of the dollar. The EU is also considering a possible relation of their interest rates. Whether it's the highest exchange rate in recent history is irrelevant. It is what it is.

If you have observed the vacillations in the rate for the last month or two, you will probably note that the rate has peaked and is wobbling somewhere around $1.25, plus or minus a penny or two. Having already said no one knows for sure, I will say that I firmly believe the rate will improve before October, but not dramatically. My best guess is that it will drop to around $1.15, perhaps a bit lower.

IF (and note the IF) the rate does drop as forecast, the difference in your projected expenses will still be less than ten percent. So if you think that a less-than-ten-percent reduction in your expenses is going to make the difference between going and not going, you should probably replan your trip. Good luck.

For what it's worth, the Financial Forecast Center (http://www.forecasts.org/euro.htm) projects that by June a Euro will cost $1.08. I have no idea how accurate their projections are. But if true, the trends should be of encouragement to you.

Sounds good, but I'm curious. Is the official name Financial Pollyanna Forecast Center?

I wondered that myself, Patrick. They did have a picture of Julie Andrews dressed as Mary Poppins--maybe that's the tip off?

Reminds me of the great John Candy line in Planes, Trains and Automobiles. Paraphrasing: "And if they told you that wolverines would make good pets, would you believe that too?"

no, it isn't true that the exchange rate vs USD is the worse since WWII. Where do people get such bad info from. Right now, the USD is worth about .80 euro; in former currency, that is about 5.25 French francs, as one example. The exchange rate was definitely worse than that many times since WWII, and I was in France during some of that time -- I remember when it was worth about 5FF in the 90s. I think it was worse than 5.25FF to USD almost every year from 1948-1969 and 1972-1980, as well as 1995-1996.

I don't think that Texas Forecasts company is very good, it's not a big major reputable company with good economists or anything.

Highest since WWII ? It's kind of hard for this to happen.
The Euro has only been in existence for only about 2 years now.

Anyway, I just heard a comment on CNBC that the US$ may have reached bottom at this point against foreign currencies, specifically against the Yen and the Euro.

"US$ may have reached bottom at this point against foreign currencies, specifically against the Yen and the Euro."

then again, it may not...

"then again, it may not... "

Then again, I simply offered a comment from a TV program and not necessarily endorse it or refute it.

Do you have anything to contribute?

All of this info about the Euro has me confused and concerned as well, but, before the Euro, there were plenty of times when we benefitted quite nicely by having a stronger dollar against the Deutsche Mark (DM)

I remember my parents saying that they were getting more than 4 DM's for each U.S. Dollar back in 1972.

I can remember being in Germany in 1984 and I got more than 3.50 DM for a U.S. Dollar.

I can also remember another time, when I was getting 1.40 DM, or so for each US Dollar. Those were tough times. Really had to stretch the old Deutsch Mark.

On the other hand, in January 2002, I paid 88 cents or so, for a Euro. Only wished I had dumped whatever it is that I lost in the Stock Market and bought up Euros. Would I ever be a happy investor today.

I am hoping that the Euro exchange gets a bit better between now and May. I'll be there for 2 months and a 20% difference from today's exchange rates will make me a happier traveller. If it doesn't get better, it's not the end of the world. I'll still have a great time.

Happy travelling to everyone!

"Do you have anything to contribute?"

as a matter of fact.... but first, may i politely question the value of the contribution, "US$ may [or may not] have reached bottom at this point..."

as earlier suggested, the best advice is to pay attention to what comes out of the G7 meeting this weekend. european finance leaders are fearful that a volatile usd would lead to global recession, and as a result will most likely reduce their interest rates should the usd continue to fall. The barrier appears to be $1.30:1.00 euro.

I was in Amsterdam on New Years Eve when ATMs were dispensing Euros at the strike of midnight. The dollar certainly was stronger then. However, it was only a year later I was getting about 87 euros for every $100s at the currency exchange. What I'm trying to figure out is if a US currency exchange will give me more Euros for my bux then a European currency exchange. What about waiting until I'm in Europe to withdraw cash from an ATM there? Moreover, what extra finance charges could my credit card company add if I use my card over there? I really haven't paid attention about any of these things in the past two years. I guess I was more preoccupied by the fact that the dollar had weakend and that I couldn't be as frivolous as I was in the past. :(

As I've mentioned before, last year I returned from Europe with several hundred euro left over. I put them in the safe deposit box for this summer. They've done better there than any of my other investments.

it's generally agreed that you will get more euros for your usd in europe than in the usa. this stands to reason in that a usd for euro exchange in the usa requires at least one more middleman than the same transaction in europe.

but, best check with your bank and credit card company for their exchange/conversion fees.

BigFeat asks

>What about waiting until I'm in Europe to withdraw cash from an ATM there? Moreover, what extra finance charges could my credit card company add if I use my card over there? <

Hi BF,

You get the best exchange rate by getting your euros from an ATM. The European banks give you the bank rate and do not add any fees. Your US bank will charge you a fee for 'out of network' service. Mine charges $0.75. Others charge as much as $3.00/use.

Visa and MC add 1 percantage point to to the bank exchange rate for changing euros to dollars. Some banks add as much as 2 points to that. Call your credit card company.

AMEX adds 2 points.

"european finance leaders are fearful that a volatile usd would lead to global recession, and as a result will most likely reduce their interest rates should the usd continue to fall. The barrier appears to be $1.30:1.00 euro"

Speaking of your value, do you know that the Bank of England jsut raised their rates by .25% this morning? So much for your theory that G7 are likely to reduce rates. Yup, with the economic recovery, heating financial markets, the G7 would gladly cut rates - not a chance in my opinion.

By my quoting a Financial Economist on CNBC who is definitely more qualified than any of us here, you included, I merely presented a professional's take on the subject matter.

"By my quoting a Financial Economist on CNBC who is definitely more qualified than any of us here, you included, I merely presented a professional's take on the subject matter."

exactly the point of my disagreement... if the "professional's" "opinion" is that it may [or may not] be at the bottom, WHATEVER you and i have to say on the subject has just as much value.

a final point of clarification; euro financial managers won't move to support a falling usd, until/unless threatened by euro recession.

Uhhhhh:
You boldly stated that European will reduce rates to support the falling US$. They care about the $ much less than they care about their own economies and financial markets. Hence, as evidenced by today's Bank of England move, interest rates will not be reduced and, more likely, raised in Europe.

Finally, I certainly believe that a qualified professional's opinion is more valuable in my mind than an untrained armchair analyst like you.

There are more variables than just the exchange rates. And, exchange rates in "Europe" vary from one currency to another. Euros? Swiss Francs? Russian Rubels? Kronors?

Often, when the "exchange rates" are not all that favorable, air fares and hotel rates are, all depending upon where you plan to visit.

Since "thinking of making a trip" is a rather unclear endeavor, the rate of exchange is probably not the most significant issue in determining whether you go or not.

For example, once you determine your budget, if you have one, you can go anywhere you like, irregardless of the exchange rate. Your budget will determine how long you can stay.

Or, your could book an escorted tour of some sort, with air fare, transfers, hotel, meals, touring and sightseeing all included, for which you would pay in American Dollars, and you'd need only worry about the "exchange rate" with regard to souvenir purchases and shopping, in which case any fluctations would be rather insignificant in the overall.

Or, you could research and figure out which of the European exchange rates are more favorable than others at the moment.

Or, you could plan travels to the Orient, South America, Canada, Australia, New Zealand, etc., when those rates are most favorable for traveling.

Or, you could vacation in the USA (assuming that's where you live) when NONE of the international exchange rates suit you and save your international travels for when the rates are more favorable.

I'm wondering here - WHERE is ELSEWHERE?

While I certainly didn't mean to open this can of worms, I see I didn't make myself too clear on what I was wondering...

I am not speaking of Euro's but of the Pound. British Pounds vs. US Dollar is at $1.83.

While I am not to clear on the how's and why's [no financial guru here...just your regular Joe curious to thoughts on the price coming down...at $1.83, you are almost paying double for anything you do or want to do, and many of my British friends are even reconsidering visits back home at this time].

I can take, from these comments that most feel it should be a bit better toward the end of the year for the Euro, and thus the GBP?

thank you again...and thank you for being patient and kind for those of us that are financial knowledge challenged.

get it right, rcc..... note the last five words of the following...

"european finance leaders...will most likely reduce their interest rates should the usd continue to fall."

and btw, was it sweden that cut interest rates today?