iahphx

As a world travelling American, the sudden and profound rise in the value of the Dollar is great news. For more than a decade, I've witnessed Europeans being "king of the hill" for no logical reason, other than the Euro being over-valued due to currency machinations. Now the tables have turned, and the Dollar is appreciably more valuable against most world currencies.

As far as I'm concerned, there's only one downside to all this: my USA-chain hotel points will be less valuable overseas in 2015. This is because there is typically a one-year lag in pegging hotel categories to dollar-denominated room rates. With the dollar being up so much, most foreign hotels will seem to be in the wrong (too expensive) category, and you'll often do better just paying for the room.

I personally experienced this in India in 2013 when the rupiah collapsed. There are lots of excellent chain hotels in India, but all of them felt significantly over-priced on points that year. That changed in 2014 when almost all Indian hotels went down a category or two. I didn't redeem a single hotel loyalty point in India in 2013, where I would have redeemed for several hotels in 2014.

Still, a small price to pay for being a lot wealthier overseas this year!

EricH

Yeah, it's a real bummer that European hotels are cheaper for us Americans.

pdpdoogie

I believe the point iahphx is making is Americans can save money by using cash this year and save the points to use next year when you get more value. Couldn't agree more.

iahphx

Bingo. It will take a year for the award categories to catch up to the room rates. So far fewer attractive int'l award redemptions this year.

This is obviously not an overall bad thing but, believe me, it will feel bad when you go to look at foreign hotel awards.

B747-437B

You've either got the wrong country or the wrong currency. Rupiah is the currency of Indonesia.

muji

And rupee the currency of India.

Doc Savage

Except that there is the persistent devaluation of hotel points to consider.

theassassin

I suppose the U.S. Fed's quantitative easing, which has been the main driver of a weak US dollar, is an example of "currency machinations".

iahphx

Thanks for tangential (but accurate) correction.

You can call it whatever you want, but the high value of the Euro the past decade has made little economic sense. Honestly, I'm surprised the Europeans stood for it, because it only made their struggling economies weaker. Clearly, the dramatic changes taking place recently are good for US tourists, but probably bad for US industry, as they will no longer have the advantage of an artificially-depressed currency.

theassassin

I am not sue the "Europeans" had a choice. They are not one country (but are one currency) and with different economies running at different speeds and with different domestic agendas I am not sure that QA was an option.

They are on to it now, and with the US stopping its QE the currencies are moving as you say.

The greenback is riding high once again, as it should given the strength of the U.S. economy as compared to the rest of the world.

EricH

Why would you expect point redemption rates to decline because their value in terms of the US dollar have declined? They've gone up in terms of the euro and these are global corporations. Maybe they'll increase.

iahphx

As explained above, the US hotel chains peg the award categories to room rates priced in US dollars. A European hotel that sold for 200 dollars last year is now only about 150 dollars -- even if guests were charged exactly the same in Euros. This hotel will, in all likelihood, go down a category on an award chart and be cheaper to redeem for next year. At this time, though, it's a bad redemption because the award chart still "thinks" it's a $200 hotel. My India example (above) gives a real world example of how this plays out.

Of course, a hotel chain could get greedy and not reduce the category but, in general, they seem to do so when the dollar cost of a stay declines.

EDIT:

BTW, if I were to place a bet, I'd bet on further weakness in the Euro and therefore a further disparity between value and hotel award categories this year. Like look what's going on this week with Greece, where a party that doesn't believe Greece should actually have to pay its bills (they call it "anti-austerity") is likely to be voted into power. If this makes you want to buy Euros, you are a contrarian!

http://www.nytimes.com/2015/01/26/wo...=top-news&_r=0

mmff

Not "likely" anymore, they indeed won the vote: Greece election: Anti-austerity Syriza wins election

This result was however quite predictable, so even Europeans had plenty of time to buy USD and (hope to) enjoy easy returns on the weeks to come.

iahphx

Anyone who did that has more financial problems than dealing with their now less valuable hotel points.

The only markets harder to predict than currency markets are energy markets, but I'm pretty sure we're going to see a new low in the Euro tomorrow. I also wouldn't be surprised to see parity before summer. I personally was going to buy some European hotel rooms today, but figured I should wait at least a couple days. Kind of like a cashback bonus.

mmff

Well, for some of us multi-currency checking and savings accounts are a must, so it is just a matter of "rebalancing" the percentages from time to time.

Although you're right to point out that, especially in the short term, FX markets are highly unpredictable, it certainly looks like the EUR is going down compared to the USD in the medium term. The EUR/CHF pair is a whole different story and depends heavily on how the Swiss politicians react to the current situation.