the Dollar went to hell today it looks like
 

I am leaving for Europe in 10 days so I made a habit of checking on how the Dollar has been doing every day for the last week or so. Anyway, I saw that it took almost a 2% hit today! The graph looked like Wile E. Coyote falling off the edge of a cliff. That's not very good news. Hopefully that's not a trend.

But according to Bloomberg.com, it just might be.

http://quote.bloomberg.com/apps/news...fer=news_index

Currency investors ``got caught on this one big time,'' said Enrico Caruso, chief trader at currency hedge fund Tempest Asset Management in Newport Beach, California. ``This raises serious questions about further rate hikes.''

Caruso said the dollar could weaken to as low as $1.24 per euro once it passes $1.2270.

Futures still show most traders expect the central bank to lift the rate by 25 basis points to 1.50 percent at Tuesday's meeting. After next week, the Fed has three meetings this year.

``This is definitely damaging to the dollar,'' said Jeremy Fand, senior proprietary trader in New York at WestLB AG. ``You're taking away a 25 basis-point hike somewhere down the road.'' He said the dollar may decline to as low as $1.25 per euro next week.
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OUCH!

Really?

That's odd because I go to http://www.xe.com/ucc/ every other day and it has been looking like the $ is doing better.

But anyway, the $ has been really weak for quite awhile now. I don't see how a few cents in either direction can make that big of a difference. (I've learned a lot since MY "weak $" thread a few weaks ago) ;)

According to www.oanda.com on Sat Aug 7 2004 at 01:20:01 EST, the exchange rate was 1 Euro (EUR) = 1.2277 US Dollar (USD).

Expect the dollar value to continue to decline against European currencies. The problems in Iraq and Afghanistan are costly to the US government. The US is creating money to cover these costs. In effect it devalues the dollar!

The dollar dropped yesterday after the US published bad employment figures. So the US economy apparently is doing worse than expected, the US interest rates won't rise as much as expected to cool down the economy, and the USD will become less attractive to investors compared to other currencies.

What can you do? Nothing. We just got back and, yes, it was expensive whether the Euro was $1.20 or $1.25. When you tack on credit card fees and ATM fees (or worse if you exchange cash for cash), you're probably looking at $1.25-$1.30 for a Euro.
Be realistic when you go and up your budget, if you can. My guess is that you'll have a wonderful time but don't fret over the dollar-just be prepared.

Actually, the farther the dollar falls, the MORE attractive it is to foreign investors since US securities cost LESS and you get more for your (foreign) currency.

The current administration continues to pursue a well-documented "weak dollar" policy in order to attract foreign investment and lessen the poor balance of trade.

As a result travel to Europe costs more so we either eat that or don't travel there.

It's about the same as it was when we traveled to Europe last May.

lisaneworleans, there's a lot you can do. First, get a credit card that doesn't charge any fees (with the exception of the 1% currency transation fee that all VISA & M/C charge).

Second, make sure the merchants don't do the conversion for you into $$$. All credit card purchases should be in the local currency rate. That way you will get the "best" interbank exchange. If you let the merchant do the conversion for you, it will cost you an additional 3%.

Third, use your ATM card for getting Euros. Again, get a bank that doesn't charge you conversion/ATM fees. There are plenty out there.

Bottom line -- avoid ATM & conversion fees -- that'll save you 3-5%. ((b))

Budman, not that I can speak for lisaneworleans, her point is well taken. If you're going to fret over the slight variation in exchange rate, you may spoil your fun. You can't control the currency markets. Yes, avoiding the high fees of some credit card companies (Bank One cards, for instance)and not getting money from just any ATM making sure it's a real bank's ATM, will help make your stay a little cheaper. As for making sure that a merchant doesn't convert a sale into $$$ before charging your credit card, I've never experienced that in 30 years of travel to Europe. I suppose if that happened I would be very suspicious as would the credit card company. Just my 2 cents (which will probably worth less by the end of this post).

We paid in USDs @ 1.24 - 1.25 per Euro and 1.87 per GBP in mid July.
The Euro closed 1.2277 up from 1.2057 on Friday.
The Euro is up 8.21% and the GBP up 14.42% in the last 12 months and significantly more in the last 36 months. Euro inflation and VAT add will sting more as well.
M

BKD,
Looks like my response was deleted:
You "ain't" been there recently!
This is a new scam the European Banks are perpetrating on unsuspecting gringos.
I had them attempt to charge me in USDs vs GBP and Euro in 4 out of 18 CC transactions in mid July '04. The exchange rates were in the 1.35 - 1.40 range.
I simply refused to pay in USDs which p'o'ed the merchants (who probably get a "cut"), but none refused to resubmit in local currency, lol!
M

I can't speak for the Euro, but the Bank of England raised it's interest rate by one quarter of a percent on Thursday so perhaps that'll cool the pound against the dollar in the next few weeks?

How can BOE raising interest rates cool the $/£ exchange rate (normally called cable)? Higher rates in UK relative to US will make sterling more attractive to foreign investors/speculators through higher yield. In fact the market barely moved after the latest hike, as it had been widely expected. The lower UK industrial output proved more damaging. £ lost 1% against euro on Friday, while $ lost 2%.

It is a fallacy to compare the present exchange rate to the illogically good rates of a few years ago. Looking price for price, big cities in th US and Europe are now charging similar prices for similar services, give or take. And who cares about 2%, which is $20 in $1000 spent? If you pay for your plane and hotels and car before you go, the next day's exchange rate is irrelevant anyway.

Now, if you really want to stike fear into my heart, tell me again how the dollar will go to zip should the naked emperor be re-elected and continue deficit spending, wars, and job outsourcing.

mikemo,

Actually, I just returned from Europe last week. Anyway, I didn't mean to imply that no merchants try to get you buy in dollars, just that I have never experienced that in my travels, and further, that I would be highly suspicious if one did. Perhaps I'm in the minority in not having had that happen. I concur with your vigilence not to transact business with a merchant who insisted he/she convert to dollars before purchasing. Maybe this is a trick at tourist shops, and if so, people need to be made aware.

mikemo, if you don't mind me asking, what types of shops tried the charge-in-US-dollars trick on you? I'm curious, since I'm going there in a couple of weeks. I've never had that happen in several trips but if it's something that's started happening I'd just like to know where I should be particularly vigilant.
Thanks

As it has been mentioned serveral times on this forum during the past year or so, it's called 'dynamic currency conversion' (DCC) and it's a tie-up between a merchant and their card handler. When a foreign card is swiped, the terminal recognises it and automatically displays the amount both in the local currency (euro for example) and in the card's billing currency (e.g. US$). The conversion is done 'dynamically'=instantly by the card handler, using the market rate adjusted by a few % in their favour. You are then supposed to be given the option of accepting the converted amount or the original sum in local currency, but this often doesn't happen. The percentage tucked on is then shared by handlers and merchant. Perhaps it's no great deal if you have a card that carries charges for foreign transactions, but if yours does not (e.g. from a credit union or Nationwide in UK), then you lose out.
DCC started in Ireland and is now expanding in many countries (e.g. at Harrods in London). If you want to be billed in local currency, always say so before you hand over your card.

I agree with Alec's take on this. If your card has a conversion fee, the deal that Harrod's offers to bill in U.S. dollars is essentially a wash. It's more about who gets what would have otherewise been the exchange fee, rather than any real difference in the ultimate cost to the consumer. After doing some comparisons, I do not consider the Harrod's offer to be a scam.

It was originally a scam well founded in Ireland tourist type shoppes; you know the kind of shoppe an escorted tour is brought to where the tour guide gets a piece of the action.

The gullible dumb tourist is told you know credit card companies add 3% to foreign transactions. So, pointing to the transaction rate given by exchange bureaus which are far above credit card rates anyway, the merchant says I'll give you the official rate and save you 3%.....the idiot then says fine and goes along with it.....

Of course it breaks down because only lazy fools continue to use bank credit cards that charge the additional 2%; all you have to do is get a credit card with a bank that doesn't pull this garbage and there are lots of them.

Secondly even with the 3% above interbank, you still do better than what the merchant is pulling on you. I've seen merchants get very angry at people who refuse to fall for this sham.

In the past what merchants used to have to do is sign up with both local banks for credit card processing and USD accounts with other banks.

This scam has worked so well that there are now companies pushing this in the US and other countries with the name dynamic currency conversion.

It is a sham for the most part.

Do remember folks there are 2 ways to avoid this

1. Never never use a credit card issued by those banks who impose the additional 2% charge. Use banks such as MBNA, Capital One, USAA that just pass along the 1% above interbank fee that cannot be avoided.

2. Never allow a merchant to bamboozle you with this we'll write the charge up in your currency bs. Why would they do it another than to rip you off and rip you off they will and do.

Just an example of how dynamic currency conversion is touted among merchants in the US with 'high foreign cards turnover': http://www.shift4.com/DCC.cfm
Of course, what the ad doesn't tell you is that not every Visa or Master card charges 3% (or whatever) for foreign currency transaction, and every Fodorite should search out and travel with a card with no such charges, unless they use cards for other purposes (e.g. CDW coverage, FFM, cashbacks).

The conversions were done on the CC receipts printed out for one's signature: often in very small print at the bottom with a statement agreeing to pay in the converted USDs.
Europcar, London
Khan's of Kensington, London
Rest Xeito, Guarda, SP
A Solaina, Baiona, SP
M

mikemo, so the USD amount was on the receipt or was there an agreement that you would pay in converted dollars? If the latter, aren't you doing that when you pay your cc bill? Just trying to understand.

The amt was stated in local currency(GBP and Euro) in BOLD at the top above the sig line.
The USD amt in tiny type with the agreement below.
I wrote down the amts in USDs on my corrected charge slips: when USAA was giving me bet 1.24 and 1.25 (Euro) and just under 1.87 (GBP), the European bank conversion would have been bet 1.35 and 1.4 (Euro) 1.92 - 1.95 (GBP).
M

No question that is definitely taking a beating.

<"As for making sure that a merchant doesn't convert a sale into $$$ before charging your credit card, I've never experienced that in 30 years of travel to Europe.">

BKD, I never experienced it before myself until my recent trip to Ireland last May. I got Euros out of the ATM at the airport when I landed and when I got home, it was at the exchange rate of 1.21 -- very close to the interbank rate for that day.

The following day when at Ballybunion Golf Course, I purchased some "stuff" in the pro shop as gifts. The total came out to exactly 100 Euro. When the pro shop rang up the purchase with my Mastercard, it showed the Euro amount, and the conversion of that amount to $$$. The total in $$$ was $125 & change on the CC slip that I signed.

Knowing that the interbank rate was about 1.21, I thought nothing about the conversion they did, thinking that it was just an estimate and the final amount charged to my CC would compute to about 1.21 plus a 1% conversion fee.

Well, when I got my CC statement, I found out that I got charged an extra 3% when they did the conversion.

This didn't happen at all places, but in some of the high populated tourist areas like some of the tourist areas Woolen Merchants.

Look, I know it's only a few $$$ here and there while you're on vacation, but it adds up. Just providing a tip to other travelers to be aware of this "scam." Maybe that's too harsh a word. ((b))

Makes me very glad I am not in Europe right now.

But, I am working on a home exchange in Rome for Christmas. At least I will not be paying for accomodations.

I doubt I am going to buy any souvenirs.

GSteed gave an accurate assessment of the problem. You cannot print money to pay for the Iraqui War and have a strong dollar. The Bush Administration is going to be printing money--leading to mega inflation--because it has a philosphical bent against paying for things with taxes.

And, if the Bush Administration thinks its economic policy is somehow good for the economy, all I have seen is a bad economy.

I have read some of this stuff on dynamic currency conversion and it actually may not be as bad as once thought (not that it's great)

I do know this whole thing did start out as a scam; especially in Ireland as noted above.

However what this now seems to be is an attempt to beat the credit card companies at their own game. In effect the software is attempting to see to it that the 3% fee does not go to the bank but rather to the company making the software and to the merchant.

But I cannot find out just what sort of rate is being used. It seems it would possibly be interbank + 3% which is what you would pay with the semi-criminal banks who impose the additional 2% but of course if you're smart enough to use the banks that don't pull this garbage, you're out 2%.

However, the web sites do not indicate what exchange rate is being used.

It would seem, however, that this is going to become a much more usual thing. I went to the web site of barclaycard services. Now that is the largest visa and mc processor in the UK and they are pushing this real big.

I wonder if this is going to become the norm?

this is a bad idea and i would not accept it. if something costs 10 euro, you should be charged 10 euro, not whatever the merchant wants to charge in your own currency. You should state in certain terms that you dont' want this conversion...do you really want to have to work out whether or not you are getting a good deal every time you buy something? ...then have to argue to have it re-rung if you disagree (all with a possible language difficulty). not a good idea if you ask me.

I've never encountered this thing either in any European travels and I've been there several times in the last couple of years.

I think the tip off would be if you see USD on the charge slip you sign. I've never seen that, it's not normal, so wouldn't agree to sign any slip that had something already converted. Now I suppose if it were only two pct total or something, and it was some shop with unique merchandise I had to have, I guess I would.

I agree this is not something I would want to fool with -- trying to figure out markups over euro, as I read the paper regularly when I travel, but may not know exact daily rate.

It's the merchants' European Bank that is doing the conversion in real time as the charges are submitted when the US Bank issued CC is swiped.
Long story, but the 18 charges I put on my CC totalled $7264.(only 4 attempted the exchange) so there is potential opportunity to make some real money for the bankers (I know bond traders and currency market professionals who might kill for a reliable, "riskless" 3% revenue stream).
I predict this will become standard practice unless we all recognize what is happeneing and refuse to play the game.
BTW, since 15 June, my USAA Plat MC is rebating 1% in cash on all charges which effectively "washes" the 1% fee charged by MC. Although I am an AA mile junkie, I refuse to use my (3% fee) Citi/AA/MC overseas.
Hasta luego from SMdA!
M

I think it's part of the merchant's agreement with Visa and Mastercard that when dynamic currency conversion is available, the cardholder should be given the choice of billing currency at the point of sale (hence the line in small print on your card slip). If you aren't consulted and a slip in your billing currency is presented, you are quite within your right to refuse and ask them to void it and resubmit. If they refuse, sign under protest, cross out the small print and tell them you'll seek chargeback through your card issuer as an unauthorised transaction. My experience has been that some shop staff are unaware of DCC and show surprise at my request, while others are quite happy to bill in local currency (just a press on the right key on their terminal).

Alec, et al,
Simply refuse to sign, and demand a local currency statement!
Are you a banker?
This is a major league financial scam!!!!!
M