Will the US $ rise again?
Jul 23rd, 2004, 08:36 PM
#21
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FromAtlanta,
The Bush administration has made a conscious decision to keep the dollar low. The Treasury Secretary has expressed satisfaction with the current situation.
Failing a change in that policy within this administration or via a change of administrations, there's little expectation that the value of the dollar against the Euro or pound will rise substantially. It's my understanding that it would not be advantageous for the dollar to weaken much further however, but who knows?
Do I know anything about economics? No. Only what I read in the paper. ;-)
The Bush administration has made a conscious decision to keep the dollar low. The Treasury Secretary has expressed satisfaction with the current situation.
Failing a change in that policy within this administration or via a change of administrations, there's little expectation that the value of the dollar against the Euro or pound will rise substantially. It's my understanding that it would not be advantageous for the dollar to weaken much further however, but who knows?
Do I know anything about economics? No. Only what I read in the paper. ;-)
Jul 23rd, 2004, 11:05 PM
#22
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Trouble is, if any of us knew the answer to FromAtlanta's question we'd be on our way to early wealth.
FromAtlanta, it seems you have England in your sights - fair enough, but you've picked an expensive place to go. There are some excellent destinations in Asia - say Vietnam - where your dollars will go a long way.
I can't see why the US administration would want to change policy any time soon. Australian travellers have been weeping tears of blood about the value of the AU$ (currently about US$0.72, but it's been below $0.50) for years, but exporters and inbound tourists have been laughing all the way to the bank.
FromAtlanta, it seems you have England in your sights - fair enough, but you've picked an expensive place to go. There are some excellent destinations in Asia - say Vietnam - where your dollars will go a long way.
I can't see why the US administration would want to change policy any time soon. Australian travellers have been weeping tears of blood about the value of the AU$ (currently about US$0.72, but it's been below $0.50) for years, but exporters and inbound tourists have been laughing all the way to the bank.
Jul 23rd, 2004, 11:48 PM
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FromAtlanta:
The short answer to your question is that it's really pretty unlikely the USD will rise significantly against the pound in the next year.
Now here's a long answer. The current state is the result of several factors:
1. The policy of the US Federal Reserve (under this Administration and under the Democrats) has been to keep US interest rates low, to stimulate economic growth. This depresses the US exchange rate - and there's no evidence Kerry at al have any interest in changing things.
2. The Euro, by contrast, is statutorily managed to keep inflation in the Eurozone low. This means relatively high interest rates in the Eurozone, and consequent upward pressure on the Euro. There is virtually zero chance of this policy being changed.
3. Additionally, traders' sentiment is that the dollar should be treated with suspicion because of America's rising budgetary and trading deficits. It's possible a new adminstration - if there is one - might change some part of this. But it's only one factor in the dollar's weakness: and the Democrats' love of trade protection is likely to push them, if they win, towards further weakening the dollar (which, in theory, makes imports dearer, exports cheaper, and so encourages US manufacturing. Even though there's no manufacturing left, there's still a lot of jobs in union bureaucracies the Democrats need to support)
4. The dynamics of why Britain has relatively high interest rates are probably too complex for this time of the morning, and are essentially about keeping house prices down. But they're unlikely to change in the next year. And the £ will always tend to move as a sort of half-way house between the $ and the €. So a strong € tends to push the value of the £ up.
Net net: whatever the US does (and all governments are more interested in trying to create or retain jobs than in making life easier for foreign holidays), what the UK and Eurozone central banks do is more important to the £-$ relationship. The best that's likely is the kind of 5% fall in the £ that actually is less important than the pricing decisions UK merchants make.
The short answer to your question is that it's really pretty unlikely the USD will rise significantly against the pound in the next year.
Now here's a long answer. The current state is the result of several factors:
1. The policy of the US Federal Reserve (under this Administration and under the Democrats) has been to keep US interest rates low, to stimulate economic growth. This depresses the US exchange rate - and there's no evidence Kerry at al have any interest in changing things.
2. The Euro, by contrast, is statutorily managed to keep inflation in the Eurozone low. This means relatively high interest rates in the Eurozone, and consequent upward pressure on the Euro. There is virtually zero chance of this policy being changed.
3. Additionally, traders' sentiment is that the dollar should be treated with suspicion because of America's rising budgetary and trading deficits. It's possible a new adminstration - if there is one - might change some part of this. But it's only one factor in the dollar's weakness: and the Democrats' love of trade protection is likely to push them, if they win, towards further weakening the dollar (which, in theory, makes imports dearer, exports cheaper, and so encourages US manufacturing. Even though there's no manufacturing left, there's still a lot of jobs in union bureaucracies the Democrats need to support)
4. The dynamics of why Britain has relatively high interest rates are probably too complex for this time of the morning, and are essentially about keeping house prices down. But they're unlikely to change in the next year. And the £ will always tend to move as a sort of half-way house between the $ and the €. So a strong € tends to push the value of the £ up.
Net net: whatever the US does (and all governments are more interested in trying to create or retain jobs than in making life easier for foreign holidays), what the UK and Eurozone central banks do is more important to the £-$ relationship. The best that's likely is the kind of 5% fall in the £ that actually is less important than the pricing decisions UK merchants make.
Jul 24th, 2004, 12:02 AM
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I was in the UK (London 8 - 10 and overnight on the 20th, and Hambleton Inn on 10-12 July). The cost of everything when paid for in USDs is really outrageous: the LGW express train to Victoria Station is 12 GBP, but that's $44.88 for two one way @ the 1.87 exchange rate. I paid $6.48 a gallon for petrol. The very nice Hambleton Inn was 232 GBP ($434.)per and a pint of bitters was 4.5 GBP ($8.42). The Summer Sale (40%+ off) at Harrod's was a joke as Neiman Marcus has more reasonable every day pricing.
One would think that as US interest rates rise the USD will gain on the GBP and Euro (we got about $1.24 - $1.25 in Portugal and Spain 12 -20 July vs $0.86 in '01 and $0.98+ in Sept '02). Those swings are certainly more than the 5% figure quoted on several posts and would be enough to make many folks consider other destinations. I think the GBP would have to return to the 1.25 - 1.30 range to encourage me to revisit London.
M
One would think that as US interest rates rise the USD will gain on the GBP and Euro (we got about $1.24 - $1.25 in Portugal and Spain 12 -20 July vs $0.86 in '01 and $0.98+ in Sept '02). Those swings are certainly more than the 5% figure quoted on several posts and would be enough to make many folks consider other destinations. I think the GBP would have to return to the 1.25 - 1.30 range to encourage me to revisit London.
M
Jul 24th, 2004, 12:58 AM
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Have you thought of booking a trip where transportation and hotel are paid in advance in US dollars? For example, virgin-vacations.com has many such deals for independent travel. That way the only expense you have in the other country's currency is your food, museum, etc., admissions, and any souvenirs. You aren't locked in to being with a tour group unless you choose such a plan, and you have a pretty good idea in advance what your final cost will be. We had a very positive experience on the one trip we made through Virgin to Paris last year.
Jul 24th, 2004, 01:30 AM
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nonnafelice,
It makes little difference whether one pays USDs in advance or on return. We are still stuck spending very weak USDs.
That said, I did get a deal on the London Hotel with a prepay/noncancel arrangement. The Eurocar and AutoEurope prepay deals were not as great as in the past and the near last minute rates were a couple $$ less (but perhaps with less choice of cars) - I leased a large Toyota/Camery equiv in London for travel to Hambleton and back to LGW for 4 folks and a VW Golf 1.2L in PT for 2 people. I drive 5 sp cars in the US, so I save a bunch on 5 sp cars in Europe (auto trans cars may be 50% more, and the 1.2 L VW would not be drivable with an auto tranny, imho).
M
It makes little difference whether one pays USDs in advance or on return. We are still stuck spending very weak USDs.
That said, I did get a deal on the London Hotel with a prepay/noncancel arrangement. The Eurocar and AutoEurope prepay deals were not as great as in the past and the near last minute rates were a couple $$ less (but perhaps with less choice of cars) - I leased a large Toyota/Camery equiv in London for travel to Hambleton and back to LGW for 4 folks and a VW Golf 1.2L in PT for 2 people. I drive 5 sp cars in the US, so I save a bunch on 5 sp cars in Europe (auto trans cars may be 50% more, and the 1.2 L VW would not be drivable with an auto tranny, imho).
M
Jul 24th, 2004, 02:20 AM
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Indeed where on earth would one be drinking to pay £4.50 a pint... the only place I can think of is at an "event" - sporting or cultural - where the captive market wouldn't stampede for the next nearest pub.
Dr D.
Dr D.
Jul 24th, 2004, 04:53 AM
#32
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Anyone can predict the direction; few can do it with consistent accuracy.
So long as the fiscal policy of the United States is to run deficits which are financed by borrowing (either from domestic or international sources), the dollar will appear to be weak. When we resume running our budget at or near surplus (see l997-2001), we will see the dollar strengthen. When we stop giving tax preferences to the ultra-rich and shift the burden of government services performance onto the back of the states, we will continue to look like a nation with no financial discipline. Hence, our debt will grow and our borrowings remain high.
Will this change anytime soon? No.
But then my credentials are suspect, having spent nearly all my career as a banker. My career was cut short when the MBAs ran our immensely-profitable institution onto the rocks by speculation, following the advice of management "experts," and ignoring the signals reported by the little people who served our customers.
So long as the fiscal policy of the United States is to run deficits which are financed by borrowing (either from domestic or international sources), the dollar will appear to be weak. When we resume running our budget at or near surplus (see l997-2001), we will see the dollar strengthen. When we stop giving tax preferences to the ultra-rich and shift the burden of government services performance onto the back of the states, we will continue to look like a nation with no financial discipline. Hence, our debt will grow and our borrowings remain high.
Will this change anytime soon? No.
But then my credentials are suspect, having spent nearly all my career as a banker. My career was cut short when the MBAs ran our immensely-profitable institution onto the rocks by speculation, following the advice of management "experts," and ignoring the signals reported by the little people who served our customers.
Jul 24th, 2004, 05:31 AM
#33
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Mikemo:
You have to understand that the US government (or rather the Fed, which is actually independent of the government)is a bit player in all this. If central bank A puts interest rates up, so do central banks B and C. So relative exchange rates don't change. Generally speaking the Bank of England and the ECB have let their interest rates go up pretty much simultaneously with the Fed.
The one thing the US government can - and won't - do is to reduce your Federal deficit.
You have to understand that the US government (or rather the Fed, which is actually independent of the government)is a bit player in all this. If central bank A puts interest rates up, so do central banks B and C. So relative exchange rates don't change. Generally speaking the Bank of England and the ECB have let their interest rates go up pretty much simultaneously with the Fed.
The one thing the US government can - and won't - do is to reduce your Federal deficit.
Jul 24th, 2004, 07:23 AM
#36
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Actually, we're starting to think about traveling to Central and South America unless some really stunning deal to Europe pops up. There's a lot of the world we've yet to see, and Europe will still be there five years from now...
Jul 24th, 2004, 07:27 AM
#37
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Hi,
Thank you for everyone who has replied. - I started this topic late last night (I couldn't sleep!) and it was just something that was on my mind. I wasn't expecting anyone to predict the future (or think that is what I was asking)... I just thought that some people who were knowleable in economics would have some thoughts. I REALLY APPRECIATE THE PEOPLE WHO GAVE ME SOME GOOD EXPLANATIONS OF THE CURRENT SITUATION. (THAT IS EXACTLY WHAT I WANTED!!)
I also appreciate people trying to help and suggesting alternatives for me...but (as embarrassing as it is - I was acting strange last night!) if you read some of my comments on here, you will see the necessity of me to stick with England. Plus, a big part of me wanting to go back is for religious reasons...(It involves the British Museum, but I won't get into that) I just HAVE TO GO, and this will probably be my last time
With everyone's answers on here, I am pretty confident that the dollar will not get much weaker, so all is well.
Thanks again!
PS: P_M, you are truly a beautiful person. I really appreciated your kind words on this thread -and my others.
Thank you for everyone who has replied. - I started this topic late last night (I couldn't sleep!) and it was just something that was on my mind. I wasn't expecting anyone to predict the future (or think that is what I was asking)... I just thought that some people who were knowleable in economics would have some thoughts. I REALLY APPRECIATE THE PEOPLE WHO GAVE ME SOME GOOD EXPLANATIONS OF THE CURRENT SITUATION. (THAT IS EXACTLY WHAT I WANTED!!)
I also appreciate people trying to help and suggesting alternatives for me...but (as embarrassing as it is - I was acting strange last night!) if you read some of my comments on here, you will see the necessity of me to stick with England. Plus, a big part of me wanting to go back is for religious reasons...(It involves the British Museum, but I won't get into that) I just HAVE TO GO, and this will probably be my last time
With everyone's answers on here, I am pretty confident that the dollar will not get much weaker, so all is well.
Thanks again!
PS: P_M, you are truly a beautiful person. I really appreciated your kind words on this thread -and my others.
Jul 24th, 2004, 07:41 AM
#38
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Hi From,
There is absolutely no one who can answer your question; not even the Great God Greenspan.
However, you are planning on going to a rather expensive country.
Have you considered other countries where costs are lower - Slovenia, Croatia, Hungary?
There is absolutely no one who can answer your question; not even the Great God Greenspan.
However, you are planning on going to a rather expensive country.
Have you considered other countries where costs are lower - Slovenia, Croatia, Hungary?
Jul 24th, 2004, 08:05 AM
#40
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They speak English in Australia and New Zealand too. (They even drive on the left side of the road, just like the UK). Both are relatively inexpensive, with the exception of the airfare from the US. Maybe you should vacation in those places, in addition to Canada.
