Euro -- 11% drop by June ????

If anyone "knows" what the Euro, or any other currency, will do over the next 7 months, they would be billionaires and not have to waste time posting on a web site

That is why it is called a FORECAST.

Since we're going back in June, I'm SO keeping my fingers crossed that this actually happens. But I'm not betting on it.

There was an earlier thread on currency speculation, that time started by someone convinced that the euro was bound to rise dramatically against the dollar by summer.
www.ricksteves.com/graffiti/helpline/index.cfm/rurl/topic/56989/currency-war.html As I noted in my last post there, currency forecasts are inherently unreliable because currency values depend fundamentally on market reactions to developing political events. One little unanticipated incident and economic modeling of currency values is out the window. So, no matter how good your computer skills and your economic models, unpredictable real world events swamp anything capable of being modeled. Buying currency in advance is like going to Vegas for the weekend--sometimes you'll be up, sometimes you'll be down, and if you find the gamble is entertaining, it may be worth it just for the sake of the fun in it.

I tend to agree with JER on this. No matter how much research is done, "forecasts" are based on conditions at the current time, and there are a lot of "uncertainties" that could drastically change the situation before next June. The fiscal situation with some EU countries is still somewhat volatile. The current €80B loan provided to Ireland may only be another in a series of "bailouts". Spain, Portugal and Italy may also need help according to news reports I've heard. Also, Greece still seems to be having a few problems getting their finances sorted. Whatever events take place over the next few months will almost certainly have an effect on the Euro. I tend to place more credence in short term forecasts. Cheers!

Everyone always inquires about buying Euros prior to going to Europe or getting them there. Getting them there does provide for your best exchange rate (normally), but that does not take into account the exchange rate at the time. If the Euro is higher than normal against the dollar then you will probably lose a bit. If you know for a fact that you are going to Europe I suggest looking into buying Euros using dollar cost averaging. Below is a snapshot of how this works. I don't pretend to be a financial planner or advisor, but this is pretty simple mathematics. Even with the cost of bank fees to purchase the Euros you will probably still be money ahead if the Euros goes up. I'm just throwing this out there for public consumption and the ultimate choice is up to the traveller. "Instead of purchasing Euros in a lump sum, the traveller works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over time, providing insulation against changes in market price." Google "Dollar Cost Averaging" read up and decide if it works in your situation. Normally it is used when buying stocks, but works with currencies too.

Dollar cost averaging works best when buying assets that are potentially extremely volatile in price, like stocks. Shares of a stock that is $50 today might be $500 next year, or $5. If you bought a little of the stock periodically over that year, you'd hedge on its price. You'd make less profit if the stock ultimately went up a lot, but you'd take less loss if it went down. But it is worth it to hedge against possible significant downward devaluation, even at the cost of forgoing a degree of upward rise in value. Major world currencies simply aren't that volatile. (The IMF and the World Bank make sure of that; serious instability of major world currencies would be disastrous for the world economy.) The euro might be worth $1.20 this summer if we're lucky, or perhaps $1.70 if we aren't, but the euro isn't likely to be dramatically volatile worth extremes like, say, either $20 or 20 cents. So hedging, which is what dollar cost averaging is, isn't worth it in this case. That's especially true if you factor in the transaction costs upfront every single time you order more euros. You'd have to hope that the euro went up sky-high, enough to cover your transaction costs and still leave you with a profit. If the euro only goes up a little, you lose money because of the transaction fees. If it stays flat, you lose even more money. If it goes down against the dollar, you lose an even greater amount. Bottom line: for the kind of money we're talking about here, currency hedging probably doesn't make sense. Obviously if you were dealing in huge sums (millions of dollars or more) you might need to hedge against even small currency fluctuations. But not for the amount most tourists spend. If you feel compelled to hedge, think about prepaying some of your euro expenses at today's exchange rate, but only if you get a decent exchange rate and minimal transaction fees.

The dollar would be soaring against the Euro if we had a better handle on our own debt. As it is, both currencies are tanking against gold. Russia and China just agreed to no longer use the dollar as the basis for their international trade and our cost of importing oil increases as the dollar drops. The fed, without saying it, is trying to keep the dollar low - which has started (at least a cold) trade war with China. It all adds up to fascinating stuff, but you can likely count on more volatility for the dollar (and the Euro).

My two cents is that, yes, it is true: It is notoriously difficult to predict exchange rates. The U.S. continuing to run up its debt will ultimately devalue the dollar. Which isn't to say that financial problems in Ireland, Portugal, etc., won't put downward pressure on the euro. Is it a race to the bottom? Will Germany be able to successfully save the Euro? Will successful rescues of troubled European economies lead to renewed confidence in the Euro? Or will the euro completely fall apart and bring back marks, francs, lire and so on? Will the U.S. Policy of deflating the dollar continue until summer? Will the US economy come roaring back in the first and 2nd quarters of 2011? Has a truce been called in the currency war between the US and China? It will certainly be interesting to see what the relationship between the dollar and the euro is next June. Anything below $1.30 to the Euro (rough current rate) will be an improvement for the American traveller, anything above and it will be worse for American tourists. For many of the reasons mentioned by Brad in the previous post, I still tend to be a pessimist on the medium-to-long term trend, but am the first to admit I could be wrong.

I don't know about 11%, but let's say the Euro s to around $1.20, like it did last June, and suppose you have $5000 at stake. If the Euro devalues to $1.20, i.e you'll pay 1.20 for a Euro, you'll have $320 more buying power. If for some perverse reason the Euro should rise to $1.40, you'll have $275 less. So waiting to buy depends on if you are willing to lose less than $300 for betting on the rise of the dollar. What kind of gambler are you and how much can you afford to lose? If it were me making the bet, I'd wait and watch the daily fluctuations, and I'd also pay attention to European economies. That's a lot of work for a few hundred dollars, but maybe I'll learn something useful. If I saw a trend reversal, let's say the Euro starts climbing for 3 days straight, I'd buy, regardless of what's happening with Italy, Portugal or Spain. But use your own crystal ball. You need to be comfortable with your decision, and it's not worth getting ulcers over a few hundred dollars.

If you REALLY want to gamble, you could trade on the currency market, in which case (because of leverage), a 20 cent move in the euro would be considered huge, and could make you $1,000's -- IF you guess correctly. Of course, if you guess wrong (which most of us amateurs do), you could lose your entire stake.

A far safer way to make money on currency is to be a banker or money changer. They make money on a transaction no matter which way a currency goes. And banks, as we all know, never use their own money. Next time you are at an international airport, look at the exchange rates of a money changer and compare them to the posted values on the foreign exchange. You'll be quickly convinced that speculating on exchange rates is perhaps the wrong business.

In going to Europe every summer, I find out what the exchange rate is when I get there. This is one less thing that I have to be concerned about as I go thru my daily struggles.

As calculated by Dax, the difference in buying power because of exchange rate fluctuation is pretty insignificant in the context of the total cost of a trip to Europe. I agree with Charlie; don't worry about it. Some years you do great, some years you don't. I've been in Europe when the rate was $.89/1€ and when it was $1.55/1€. This summer, we paid $1.25/1€. You never know.