The rising cost of the euro

Linda,
Since most banks charge 4 or 5% (added on the exchange rate) and ATM withdrawals in Europe can be done for 1% above the interbank exchange rate you are betting that the dollar will fall by 3 or 4% to break even, not counting on any gain your money could earn.

I asked the same thing last week - and few others did as well. Seems like its a 50/50 split. Basically - if you buy 300-500$ now at 150 - you will save a little bit vs buying at 1.55-1.60 by next spring. If you have the cash now and you feel better being "prepared" and saving 50$ or less... go for it. If you use the Credit Card for big purchase like most - you will get the best banking rate when they exchange huge amounts. So as the other poster mentioned - it probably wont make a big diff. The cost of a couple beer or Ice-Creams! If you plan to do all cash and need 1000s of euros - it may be worth while! But who wants to travels with all cash in places that take CCs - safer and traceable!!

Really, I was thinking of getting 3,000 euro's....the estimated cost of 2 weeks in Italy for 2 of us.

Linda,

You are assuming that the dollar will continue to drop. If anyone was sure of that, they would sell dollars now and buy euros - not just for a trip but take out the equity in the house and invest in euros. But the big money experts don't know or they would have done the same last spring. It could go either way. Will central banks support the dollar? Will China move more money into euros and drive down the dollar? Will you win in Las Vegas?

For those who seem to have the mistaken belief that I think the dollar will rise, let me say:

1) I never said that. I just suggest caution when doing currency rate betting. The dollar can go up or stay the same or go down depending on more things than you think.

2) If the dollar goes nowhere compared to the euro, in 6 months you will have lost about 2 1/2% buying now as compared to putting your money in some CDs. Remember, the dollar lost 10% in this its worst year ever since the euro came out.

3) Run a balance on your credit card? You'd be far ahead using your money to pay off some of that as compared to buying euros 6 months ahead. At 18%, you are paying about 9% in 6 months.

4) Really believe the market is going down along with the dollar? Sell short and you could make more money than your euro bet.

I won't gloat if the dollar goes up or remains the same as I can't claim credit for predicting it and please don't gloat if it goes down. you were probably more lucky than smart.

Hate to say this John, but our country is in pretty bad shape right now with the war, housing slump, gas prices, etc, etc. Yes, our country will rebound, I'm sure. But it isn't going to be in the next year. Do you listen to the news? War suppose to last years longer, house prices won't start rebounding till 2010, and gas prices are expected to go to $4 by this time next year. All this has an impact on the American dollar. And yes, it's a gamble but I hate to say it, I'll bet if I write you in May, the dollar will be still lower and I'll be saying "I told you so". We shall see!

It is sad for us travellers from US. My wife and I were in London for a week recently, and found ourselves constantly performing reality checking in stores, restaurants, and museums. May be this will teach us being more humble and frugal American from now on.

At work, I am working on a construction project that has to buy European machinery and parts, and we are buying Euro now to "hedge" the weakening dollars.

For us, common guys, I guess we just to have learn how to be smart travellers and smart consumers looking for bargins / value and avoid certain things we used to do / buy when we are in Europe.

Happy Travelling!

Thanks Mike and you are so right. We do spend money way too foolishly in this country and I guess, like it or not, we just have to watch what we spend when traveling in Europe. One thing I have to keep in mind though is "just enjoy".

I travel to Italy quite a bit. If you track the euro back a year ago it was around 1.30 now it's somewhere near 1.50 I myself like saving money when in Europe. Personally I would buy the Euro's now if you have the extra cash. Who knows what the exchange rate will be next May. If the rate goes up another dime think of how much you are saving. If the rate goes down it won't be too much. Usually the rate is at it's best in October, and it goes higher after that. Check with your bank, they will help you by comparisons. Also a little bit of advice, you can negociate the commission at the bank if you have someone you know. I just bought 4000.00 in euro's at a 1.35 Good luck

Greg

Thanks so much Greg. My thinking exactly. I wish I knew someone in the banking business but I don't. Will shop around anyway. Thanks!

3000 eu for 2 sounds right: i went with 1000 for 2 weeks, [all hostels, tho], and had to withdraw 300 us towards the end. i personally liked having the euros in my money belt;didn't have to keep looking for ATMs, and kinda helped keep track of my spending as well. [last may].

Jim, you make me feel better knowing you agree with my way of thinking. All our hotels are giving discounts with cash so I feel better knowing I have it and like you said I won't have to worry about finding working ATM's and them giving me enough for all the days extras like sights, food, drinks, etc.
I will take the debit card, though, just in case. And, if the dollar continues to drop, I won't have to worry. Thank you!

i don't know where john got "10%"...in May the exchange rate was 1.00 US= 1.33 Euro. it is now 1.00US =1.50 Euro. [that's for italy...i shudder when i think GBritan] ..that's closer to 12%. as far as the dollar going up? eh...maybe AFTER the election NEXT year...we still have that funny little 3 TRILLION dollars we owe china...foreclosures, gas, it just goes on and on...i am no economist, but..hellooo?

Henry made a good point about the % commission between banks and ATMs. But it got me thinking: Could I just open an account at a European bank now, and would my initial deposit be subject to a conversion charge? Then get an ATM from that bank to use.

I'm planning a trip next summer, and as I watch the dollar continue to drop, I'd like to somehow "lock-in" now. I don't see anything in US policy or behavior that will reverse the slide in the next 12 months. Would it make sense to pay for any big-ticket items (like a decent hotel in Venice for 5 nights!) now?

/not an Economist!

We just saw Rick Steves last night in Northern California. When asked about the dollar verses the Euro, his response was, "It doesn't look good. Just expect to pay a higher exchange come travel time." He gave multiple reasons for the dollar to continue to drop. Sorry folks.

He did say that the Europeans are sympathetic to the Americans plight and understand when you have to share a meal or go for the cheaper house wine.

But his speaking engagement was top-notch and a great boost just before our departure date, deflated dollar or not.