A surprising thing happened to me yesterday as I flew back to America from the airport in Berlin, Germany. I was given the option of receiving change back in Euros or American dollars. Faced with quickly deciding which currency would hold its value over the next few weeks, to my surprise, I found myself thinking of the dollar as the better bet. I haven't had that feeling in the better part of a decade.
The Euro's at a four-year low, and signs points it to going lower this summer. Greece and Spain already already having fiscal woes, and Hungary is reportedly joining the ranks of the ailing. As some participating economies are sag under debt, the whole Euro currency system is dragged with them, and some pessimistic experts even predict that the Euro as we know it will cease to exist in five years.
In the face of such apocalyptic warnings, there can be only one prescription for Americans: Go to Europe!For the first time in years, the American dollar is climbing against the Euro, which covers all of Western Europe and much of Central Europe. There was a time, upon its first introduction, when the currency was worth less than the dollar, making everything in Europe a supreme bargain, but those times are over. Recently, you might have to spend $1.59 to get a single Euro. But now, that price differential has plummeted to €1.19 a dollar.
What does this mean in practical terms? It means that visitors abroad won't have to do much math anymore. The Euro is flirting ever closer with parity with our dollar, which would mean that the price in Euro is pretty much the price in dollars, only a shade more expensive. That €1.50 cappuccino, instead of costing a bone-crushing $2.30 as it might have two summers ago, now costs just a little more, or about €1.80. Multiply that over the price of hotel rooms and meals, and you've finally got a Europe you can afford again.
Last summer, a two-star hotel that with a €100-a-night sticker price appeared on your bank statement as $140. Now it's $119, or $21 cheaper. It's an instant discount, and it adds up over a trip.
The British pound, too, is sagging, although less than the Euro. There was a painful time in recent memory when Americans had to pay almost $2 for every £1, pretty much doubling every price. But now about $1.44 will buy a pound. The rates have been better, but they haven't been so for a while.
There's no telling if these deals are going to keep going. But in economics, as in investing, the key is to act when there's a door of opportunity, not hedge on what the future may bring.
How convenient that the summer travel season has started and airfares are also comparatively cheap compared to recent seasons -- the two phenomena together means the time is ripe to take that European vacation you've been putting off for money reasons.
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