RustyC

Don't forget the fuel surcharges that are being added now. Makes the $300-350 all-in RTs of not too long ago all but impossible now. That and all the taxes cost $250 to many places before you pay your first dollar in airfare.

I usually try to do at least one "opportunistic" trip to Europe a year, usually in winter or spring for only about 4 days in the destination city and very much on a miles vs. fare basis. It's hard to get the numbers to align now.

I think $0.90 was the lowest for the euro when I've been there and $1.30 the highest, and a number of trips were pre-euro (if you remember, many places were accused of using the conversion as cover for raising prices!). It's still possible to scrimp on land costs in places like Amsterdam and try to absorb the shock with cuts in areas like meals. But you may be also running into a headwind on supply/demand that'll inflict further pain (Italy is supposedly bad for that lately). So, between the surcharges, exchange rate and supply/demand, you're likely taking a hit.

slickalick

With the HK dollar pegged to the US dollar - one of my clients had a very interesting experience at the bank in China the other day - for the fist time that i know of ever, when changing HKD into RMB he was offered the rate of RMB99.65 for every HKD100! Astounding!

The real downside of this however, my exports from China are 3-4% more expensive now than they were 3 months ago - and every day i get calls from Buyers (especially in the US) trying to squeeze my prices more and more....they don't seem to grasp the concept of the dollar losing value and its repercussions around the world! On some of my pre-committed contracts to chain stores in the US, i'm already losing 1-2% after factoring in all the costs!

kkirksea

As a US citizen, the plunging dollar has altered my vacation destinations, favoring those countries which drop has been less precipitous ( or the US$ has climbed), like China, Jordan, South Africa and Peru... and reducing my "transit bonus days" in places like London and Frankfurt.. and unfortunately shortening the stay times in Australia and New Zealand.

But I'm careful to select not just on the basis of exchange rates, but what, in real buying power (rental cars, dining, hotels, internal flights, taxis, attraction tickets, souvenirs, etc ) those exchanged $US will get me.

On the other hand, the Pounds and Euros in my desk drawer are turning out to be quite the unintentional ( and well appreciated ) investment.

Starscream

I couldn't tell you within 5 percent what the US equivalent of the last beer I had in the UK or wine I had in France.

To those predicting a continued USD retreat, what makes you think the world can afford the US economy to lose purchasing power? If spreads get too wide, current account balances will change dramatically, the USD would become more attractive to foreign investors therby pumping the dollar up. No matter how many yen Russia buys, the USD is still the currency. If the USD gets too low, what do you think the states and the IMF would do with their gold, dump it and buy green. Most emerging economies rely on exports to the states. Just my humble opinion, but I don't think many currency valuation rules that apply to most FX relationships necessarily apply to the USD. Of course that is only in today's world. The stronger India and China become, and the more other countries hold euros or yen in reserves, the more the dollar becomes a pure currency, rather than a commodity, a currency, and a vehicle. The dollar might slide/stay depressed for a couple of years but I'd be surprised if it is drastic or sustained.

Paying more for something always sucks. But if I want it, an exchange rate won't stop me.

SchmeckFlyer

Well, there seems to be some "good" news. Recent interest rate increase at the ECB have not lead to rises in the euro, and fall in the dollar. From Yahoo! find the article ECB Rate Hike Fails to Inspire Euro. Basically, the rate hikes did not cause the some sort of currency changes as past increases have done. Maybe there will be some stability in the medium term, although I'm hardly the person to predict such things. Parity. I want parity!

I don't see how the recent changes will affect spending. For most people, changes in spending will be minimal. A hotel room might cost $320 today instead of $300 a few weeks ago; it's a change, but I doubt massive enough to cause people to cancel travel. Only the huge transacations of companies and banks will be greatly effects.

GUWonder

What gold to dump? The IMF and a great number of OECD countries have dumped a lot of their gold reserves over the years. They have far less to dump, in percentage terms, than has been the case for most of the past 100 years.

That's not really true, unless limiting it to a small fraction of emerging economy countries. Also, there's less reliance upon exporting to the US than has been the case for decades. Look at the trend of export markets for most countries in the world. It shows increased export diversification ... away from "traditional market destinations" (a la the US).

Talk about a huge belief in the financial angle of American exceptionalism. Time will tell best, but in 50 years I doubt we're going to be the kind of financial exception to the rules that we currently still are (although less than in the past).

The ECB rate hikes may have already been priced into the currency crossrates, and this "no-move" is no surprise given a a consensus opinion that ECB will drag its foot slowly to hike rates on the short end after this one.

peachfront

I'm a budget leisure traveler, so always looking for more opportunities to cut costs. Most obvious is to cut trips short by a day, in the past, if a flight cost the same offering 7 nights or 6 nights at a destination, I'd go for the 7 nights. I'm also looking more closely at the hostels and 1 star hotels than I have in days gone by. I've noticed as I get older that jet lag really has a startling effect on my appetite, as in, I can't really eat for a day or two after I land in Europe, so that helps. I just don't spend very much money traveling solo. Of course there is peer pressure when traveling with friends, but at least then I can split the cost of the better hotel suite, so it balances out.

Most people could probably save enough to take another entire vacation every year if they just didn't shop. There are lots of advantages to not shopping in addition to money saved, such as not having to haul it around, not have to worry about having it stolen out of checked luggage or seized at security if you carry on, and not having it take up space in your house once you get home. If you shop only in grocery stores and markets, for food, water, and wine you'll consume on the vacation, you'll save yourself endless hassle and expense. You can't stop a die-hard shopper though. One of my friends went shopping for high end clothes and leather luggage -- in London! Does he even realize what he paid? I doubt it. But if you can afford it, more power to you, of course.

As a side note, I have been aware of Bush's "soft dollar" policy for some years, so I wasn't taken by surprise.

Starscream

Bang on. The probabilities of the next several ECB, FOMC, BoJ, RBA meetings are already priced in today (not necessarily accurately though).

I'm a newbie so I probably didn't use the quotes properly.
Good chat though.

Starscream

GUWonder, I messed that up wonderfully. My writings were every second paragraph.

GUWonder

By the way, welcome to FT. ^^

(I enjoyed the discussion too.)

Gargoyle

Not arbitrary for me, since it was during the late 1990's that my business with Italy became very solidly established (although I've been doing some there for 30 years). I purchase and import heavy weight raw materials in Italy and import them to the U.S. (marble blocks and shaped marble). My costs for raw materials have gone up 50% since 2000, and labor costs have doubled. Add to that all the increases in shipping costs (doubled in that time, paid in dollars) and the result is that I've had to double the prices I charge, and I've cut my margins. It is not comfortable, and I don't have alternate sources for the quality and materials which I need. (the "marble" from China is way below my standards, as is the workmanship, to say nothing of the attitude on intellectual property- they've been knocking off my work for years; other countries can supply individual materials, but not the variety, selection, or quality I need).

So, it's made every sale much more difficult. I have been able to keep my volume level, meaning my gross has increased a lot but my net is flat.

Sjoerd

No, the cheap US dollar is not a problem for me. I haven't been to the USA since 2003 and don't have plans to visit any time soon. However, my frequent trips to Asia are becoming cheaper as most Asian currencies are somehow linked to the USD.
I don't think the USD will go much lower. I am a great believer in purchasing power theory and the US is at the cheap end of things now. I expect Asian currencies to be the big winners of the next decade.

Edeniade

Being a student on an obviously low budget, the US dollar has affected me quite a bit. I'm a US citizen going to school in Canada, partially for the dramatically lower tuition, but mostly for the quality education. However, the falling USD has been making my tuition more costly, especially since I don't qualify for financial aid of any kind and the tuition rates for international students are relatively high. I sort of suck it up though, because tuition I'm paying is THOUSANDS of dollars cheaper than back in the states.

As far as traveling however, it hurts big time. I'm going to London next week and I have barely enough money to treat myself to an Oyster card. I guess this is where lots of savings come in handy!

*cough* Easier SAID than done. I can see that easily for business trips but vacations? Be realistic. I personally like to ENJOY my vacations.

oldpenny16

The falling dollar has made me generally gloomy. I have put off planning a trip to the UK because the combination of the falling dollar and inflation in the UK has taken all the fun out of making the trip.

Diabo

The trade deficit that results from the massive export of US$s to buy more goods and services abroad than the other way around is the main reason why the dollar is on the way down. Whether it's chinese electronics or canadian education makes no difference.