A word to the wise. The Euro is on the up again against the dollar, looking likely to hit $1.30 soon. Commentators are attributing it to Bush's (apparent) lack of concern for the US budget and current account deficits. Added to notable price increases in Spain itself, Spain will not be the "bargain" destination for US travellers that it was just a couple of years back.

I don't see the rate coming back down any time soon if the deficit theory is correct.

for those of us not from the EU - doesn't do much for trips to our favorite country does it?

Both the nature of the Euro and the rate of excahnge are important factors for the budget traveler. have been watching prices now for several years from comments made on the boards and from relatives in Spain, and indeed, Puna and El Boqueron are correct, Spain is no longer inexpensive for the tourist or for a resident.

I am planning my forthcoming trip and I figure I will spend in Spain now about the same as if I were to vacation in NYC, Key West ect. It's a treat and I love Spain! So I don't have to trade in my car yet!!

It has a side-effect Now it is a bargain to travel to US or to buy on the Internet in dollars (for example to buy in Amazon).

For the US it is very good: influx of tourists and a very positive effect on the comercial balance with Europe. For Europe it is just the opposite.

Shame on Greenspan!

Fernando

Ah Fernando - you choose your postings wisely - it's good to see you back!

Hehehe

Now that I have started to work full-time I have less time, so I have to be selective

Fernando

Congratulations, Fernando, on your new job!
yes, it's time for Mr. Greenspan to Retire to Florida!!!
Saludos,
Carmen

Thanks Carmen!

Fernando

Congratulations Fernando! I know you'll do great at your work. You bring reason to the table out here, and the same thing will hold true in your work.

With all that new found strength in the Euro, you might be able to squeeze a little time into your future travels to visit us here in the US.

I, for one, would be more than happy to have you visit.

Wolf

And I second that, Fernando! I know Charlotte isn't as intriguing as Boston was - but you might as well see as much of the country as poss. when you visit!

Besides the deficit, there are other factors, which affect a currency’s exchange rates. I do not get the opportunity to discuss economics much since I graduated; I was the teaching assistant for the “bonehead economics” students study sessions.

When a country's interest rates are high relative to elsewhere this attracts inflows of money into a country seeking to take advantage of the high interest rates. This "interest differential" boosts the demand for the currency and can cause its value to rise. Currently interest rates are low in the United States, which is Mr. Greenspan’s responsibility.

The United States economic growth is weak compared to the European countries, and currencies are traded just any other commodity. Traders in the currency markets may take the slow growth to be a sign of general economic weakness and "mark down" the value of the currency as a result. The current exchange rate of a currency is an indication of the value the currency among traders.

Selling exports represents a demand for the domestic currency from foreign importers. When US consumers buy Spanish Olive Oil they supply dollars and this is eventually translated into a demand for euros. Similarly when consumers buy imports, they supply their own currency and this is eventually translated into a demand for foreign currencies. If a country is running a substantial trade surplus there is a large demand for the currency and its value should appreciate. By contrast a massive trade deficit usually causes the currency to lose value. Currently the United States trade deficit is growing.

So with these factors and others, which are too complicated to discuss, do not look for the dollar to improve against the euro. I believe the dollar will continue to weaken, so if you are going to travel make your reservations soon.

I am just as guilty as Mr. Greenspan because I will continue to buy Spanish Olive regardless if I am contributing to the trade deficit and the devaluation of the dollar. I like it that much!

Thank you very very much for your support! I'm embarrased

I started to work full-time a month ago, and it is all going very well.

I really would like to go to the US to make a MBA in one or two years, so if things go well you will have to stand me a little bit in the US hehehe Of course, if that is the case, I will warn you with anticipation so you can have time to run away (if not, beware I will try to contact you to have a beer or a coffee ).

As for the topic, gsobotta has explained it very well (I didn't know it worked that way to be sincere).

But in economy all runs according certain cycles, now dollar is appreciated compared with euros, and perhaps in a year we will see just the opposite

Fernando

You are right Fernando, and the world economy has its cycles. The world economy endeavors to achieve balance, or in economist terms the conditions which are necessary for an economy to be in general equilibrium, or in which the markets are all cleared. This never occurs because of the simultaneous interactions and interdependencies that exist between all the different markets in the world economy.

If you wait too long to come the USA get your MBA, a beer maybe more expensive here than in Spain.

Wonderful, Fernando, remember that you can count on me to provide you information when the time comes!
Cariños,
Carmen

Doña Carmen (Booklady) writes: Two more Prime rate hikes: one this Wednesday (10/11) and another on 14/12; then Mr. Greenspan steps down.

Actually, higher U.S. Interest rates attract Capital from abroad, so the net effect should be a strengthening of the U.S. Dollar vs. the Euro

Thank you gsobotta - your brief explanation made more sense than half the econ classes I ever attended!

Even with the horrible exchange rate, beer is still a lot cheaper here in Madrid! As is wine, water, most food, the theater, movies, clothing, rent and a whole host of other things. Though it is true that tourists get terribly gauged by a bad exchange rate, the cost of living is still significantly lower than any major US city, even given the atrocious exchange rate (says someone who gets paid in dollars but lives quite nicely in Madrid)...

Where can a person find the cheapest beer!

Fernando and Mariposita fly into Charlotte, NC and exchange 100 euros and received 130 dollars. They walk into a bar and purchase a pitcher of Miller Genuine Draft Beer for $5.00 dollars. They return to the airport for their flight back to Spain, while flying home the dollar strengths against the euro on the international currency market. Once in Spain, they exchange their $125 for 100 euros.

Who bought Fernando and Mariposita their beer?

While Eddie maybe right, there is a slim chance the Fed will raise interest rate. Federal funds futures show traders are pricing in about a 20 percent chance the central bank will lift the benchmark rate to 2.25 percent by year- end, after a quarter-point boost next month. It will have a neutral effect on the value of the dollar because high oil prices and sluggish job growth may hurt an economy already constrained by a near-record trade deficit Continued sagging consumption and unemployment has fueled speculation the Fed will then scale back interest-rate increases. There's no way the Fed can afford to keep on raising rates, risking a further slowdown in the economy.

I expect the dollar to weaken to $1.32 per euro or more in a year.

Now maybe General Motors and Ford can sell some of those cars they have had setting around for several months. There is a little more room in one of those than a SMART.

Gsobotta. in answer to your question. Nobody bought their beer. After flying from Spain to Charlotte just for a beer, they deserved to get one "on the house"!

The European currency rose as high as $1.3105 in afternoon trading in Europe, breaking the previous record of $1.3074 set last Thursday. I like to revise my forecast to $ 1.35 within a year.

Oh, the answer to the international beer drinking question! Everyone who had a euro in their possession bought them the beer, because value of the euro decreased against the dollar.

THis is nuts. I never thought it would be this bad. I remember I was in Spain day one of the Euro, New Years Eve/day. There was a huge five story ballon with the euro symbol being bounced around in Puerta Del Sol. Some local Spainards chased the ballon and destroyed it and the crowd cheered beyond belief because they hated the fact of a common currency.........there not hating it anymore!!!
George W has to do something about this. It's great for American exports but for the poor American traveller ......it's tough!

The euro rose to $1.3329, and then fell to $1.3258 against the US dollar. The international traders remain negative amid growing concern in the gap in the U.S. trade deficit, the broadest measure of trade in goods and services, as well as the shortfall in the federal budget. Bush isn't all to blame for the federal budget, since Congress has to approve federal spending. But each budget starts with the Oval Office, and the president has veto power over appropriations. Also, a significant portion of the higher consumer spending went to purchase imported products resulting in a negative trade deficit.

Can I change my prediction to $1.40!

I don't think anyone in the "Eurozone", Spaniards or otherwise, are celebrating this situation. It's very bad for European Business. Bear in mind that many countries (China, for instance) peg their currencies to the dollar (the US being their major export market), so the Euro is rising against all of them, and European goods are becoming uncompetitive. There is some talk of the Euro banks intervening, but it would have to be on a massive scale to have any real effect. So yes, $1.40, no problem!

Since this thread started the US Dollar got WORSE against the Euro and now has returned to better than what it was at the first posting above.

Posted 5/25/2005 11:15 PM Updated 5/26/2005 9:19 AM
As U.S. dollar gains strength, Paris beckons
By Noelle Knox, USA TODAY

PARIS — Many hotels here are full this weekend, and summer reservations are picking up, thanks partly to a 7% rise in the value of the U.S. dollar this year that has made traveling to Europe more affordable for Americans.
---
Read the rest of the article HERE

MM thank you for the update on the $ vs the E I will watch that closley as we are planning a trip next March or April. I will post updates as I see them.

Time for an update on the EURO.As of today, the exchange is at 1.227 USD per EURO.Down about four cents since MM's last update.It has been decreasing since the French vote this past weekend.Good news for americans travelling to Spain!

And today, 1.00 Euro = $1.19 . Before you know it it'll be equal once again. It's on its way!

Saludos, MadridMan

This is by far the best news I've had all week!! Makes me a very happy camper... especially since I'll be moving to Granada in 2 months! Harrah!!!

I have not follow the exchange rate since I have returned from Spain in February/March of this year. Now I going back this coming September/October, this is great news for me and hopefully it will drop further.

Bill

This is fabulous news!! And to think I was excited when the exchange rate reached 1.22! Hopefully, by the time I get to Spain in September the exchange rate will be close to equal. All the things I can buy then! Yeah!

XE.com places the Euro as:
1.00 EUR Euro = 1.20843 USD United States Dollars
1 EUR = 1.20843 USD 1 USD = 0.827520 EUR

However, we will soon be getting a new head of the Federal Reserve. If the new head continues to raise the U.S. interest rates then the dollar will continue to rise, and perhaps do better for travellers. Read this article by Bloomberg;

http://www.bloomberg.com/apps/news?pid=10000103&sid=akk818hBbzoE&refer=us

A little better! (for us in the US traveling to Spain) Today, 1.00 Euro = $1.18 .

Saludos, MadridMan

Today, an american will have to pay $1.18 to get 1 euro.

I remember the first time I went to Spain in the summer of 1984. WOW!!! The dollar was super-high and the peseta was very low. We were getting about 250 pesetas to the dollar. We were living like kings. We didn't even bother to take the Metro. We just took taxis.

Oh, those were the days!!!!!!!

Today, 1 Euro = $1.166 USD!! Little by little it's going down...

Hey Guiri.

I remeber and long for those days. You could literally party ALL night long in Madrid for US$30.00 and still have pesetas left over for breakfast. Twenty dollars was enough to take a date out for dinner and a few hours of copas.

I don't think I could party for two hours on $30.00 now.

TJGuy: Because of the exchage rate, you could not party alnight on $30.00 when I was there in the early '70s. That is why so many dudes were so active in the black market. Certainly not the Desert Dweller.