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Dollar Falls Travelers Feel the Pain

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					                       Dollar Falls Travelers Feel the Pain
Topic     International Finance

Key       Currency Markets and Value of the Dollar
Words
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          Reference ID: A166557273

News      An American, Michael Kingsley arrived at his destination in Germany only to
Story     discover that he had left his camera battery and charger in a London hotel. The
          dollar value to replace them in Germany was $143 compared to about $100 if he
          could have purchased them back in his home town of Falls Church, Virginia.

          This is the experience of travelers all across Europe as the U. S. dollar continues its
          decline against the euro. The good news for Europe is that the travel statistics
          indicate that American visits to Europe have increased this year despite the erosion
          of the dollar. Travel experts explain the growth as an indication of the growing
          affluence of American tourists and the perennial appeal of Europe as a travel
          destination.

          “Americans who visit Europe tend to be more educated, with higher incomes, so
          they are less affected by the exchange rate,” said Joachim Scholz, a researcher at
          the German National Tourist Board. “Even backpackers have more money than
          they used to, if you look at the price of hostels.”

          The other side of this coin it the increased travel boom to the United States by
          European travelers. When the dollar falls against the euro it makes European prices
          higher to Americans but makes U.S. prices lower to Europeans. Lower prices
          translate into travel bargains for Europeans traveling to the U.S.

          In the last 12 months the dollar has declined 8.9 percent against the euro with the
          most striking fall over the last few weeks after many Americans had already
          booked their European vacation. The sticker shock comes once they get to their
          destination and realize just what the dollars decline means to them in real terms.

          “I have to be much more aware of looking at the price of everything,” said Erin
          Rogers, 21, still marveling at a $22 plate of Irish stew she ordered the previous
          evening. “I didn’t have a clear compass of just how weak the dollar was. It was a
          crash course in global economics.”

          The exchange rate squeeze may be toughest on Americans who live in Europe but
          are paid in dollars. They are getting paid just like they are home but are purchasing
          commodities and services just like they were travelers. Some companies
            compensate for the difference, but many do not.

            “It’s scary,” said Jennifer Aquino, who lives in Madrid and works for Bentley
            College in Waltham, Massachusetts. “It makes you think twice about if you want
            to keep building a life in Europe.”




Questions   Discussion Questions:
            1. Discuss how changing exchange rates affect prices in the trading countries.
            2. Visit http://www.xe.com/ucc and convert dollars to euros at the current
               exchange rate. Do you think this would be a good time to visit Europe?
            Multiple Choice/True False Questions:
            1. As the dollar falls against the euro, prices for American travelers in Germany
               fall.

                   a. True
                   b. False

            2. Using Mr. Kingsley’s example, for every euro he bought he had to pay about
               $1.43.

                   a. True
                   b. False


Source      Mark Lander, “As Dollar Crumbles, Tourists Overseas Reel,” The New York Times Online, July 19,
            2007.

				
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