I've mentioned this on flyertalk before, but as far as academic economists are concerned:
1) Short-term exchange rates fluctuate for random walk like reasons that we don't fully understand (among them, technical reasons and interest rate conditions)
2) In the long run (define this how you will), purchasing power parity will hold. This means that currencies with very expensive tradables will depreciate, and vice versa (of course, VAT and shipping costs, etc., need to be accounted for)
Given this, something like 1.1 to 1.2 dollars per euro seems a sensible long run exchange rate. I said this when the Euro was at 1.6, and my opinion hasn't changed even at 1.28; I think you'd be nuts to buy Euros in the hope of future rise against the dollar.
Programs: BA silver, MUCCIcat Hyatt, HH, cats protection league
Posts: 972
Quote:
Originally Posted by mapu
the dollar strenghens ... bad news
no more dirt-cheap shopping sprees in NYC? I hope not...
tell me about it, glad I shopped loads in the summer, have it in big writing in my wallet to remind me that $1=68p not the 49p it was in the summer, thats 35% less spending I will be doing next week, nothing was a particular bargain in 2003 when It was last at this sort of rate so I guess its only the small suitcase I will be needing
tell me about it, glad I shopped loads in the summer, have it in big writing in my wallet to remind me that $1=68p not the 49p it was in the summer, thats 35% less spending I will be doing next week, nothing was a particular bargain in 2003 when It was last at this sort of rate so I guess its only the small suitcase I will be needing
Well, the "saving grace" might be that stores may be having big sales due to slow business, so while you might not find a great exchange rate, you might find good prices.
Well, the "saving grace" might be that stores may be having big sales due to slow business, so while you might not find a great exchange rate, you might find good prices.
I was over in Arizona a few weeks ago and i was surprised how much less of a bargain shopping in the U.S had become. This mainly seemed to be because the prices of things i used to buy as a bargain, such as electronics had reduced in the U.K rather than becoming more expensive in the U.S
The upside to this was i returned home with $800 which i purchased when the rate was $2 to the £.
Can one of you economics types please explain why the dollar hasn't strengthened against the yen as it has with other major currencies?
Just heard on the radio that the JPY is the currency of choice in deflationary times. The country and its businesses use a lot of natural/raw resources (directly and indirectly through its foreign subsidiaries) all of which is imported. So falling resource prices benefits it.
The flight to the yen is understandable since it is the safest of safe havens in currencies, but the move into the dollar, a currency that was on a steep downward trajectory this time last year, is a little more surprising. "In an environment where you now don't expect American financial institutions to collapse, where you are now more worried about global market assets, money comes home," explained Koon Chow, a currency analyst at Barclays Capital, adding that this repatriation of money would not lead to any sort of bubble for the dollar.
"Many entities in the world are dollar-based, and 75% of the world's hedge funds are dollar-based," said Stephen Jen, chief currency economist at Morgan Stanley. "So when they deleverage and unwind their market positions, they bring money home in dollar cash."
__________________
"I have a fear of flying. I fear flying in the back cabin" My Flight Memory
Last edited by YVR Cockroach; Oct 24, 08 at 11:52 am.
Reason: Additional stuff
no more dirt-cheap shopping sprees in NYC? I hope not...
This reminds me of a possible side-effect even for those of us not going abroad -- maybe hotel prices in NYC will come down from the exosphere into the mere stratosphere.
You know people haven't been paying those crazy rates in dollars.
...that their currency is tanking. But what does that really translate to? Iceland Air has sent me several emails touting how great of a time it is to come to iceland.
...that their currency is tanking. But what does that really translate to? Iceland Air has sent me several emails touting how great of a time it is to come to iceland.
Country's bankrupt due to bank failures and subsequent nationalisation (largest 3 out of 6). The banks have debt worth about EUR 60 billion for a country of just over 300,000 souls. About 5x more indebted per capita than the U.S.
FWIW,the ISK should be worth half of what it is but for the suspension in trading.
__________________
"I have a fear of flying. I fear flying in the back cabin" My Flight Memory
Interesting story YVR, i'm a economics student and know all these theories behind it.
The dollar went down last week, so for EU-citizens it's great news!
