A bit of good news, the dollar reached a 5 month high on Friday (8/8/08) dipping just under the $1.50/Euro mark.

It's a start, but we'll have to see how long it'll last.

The gadget on my desktop that tracks the dollar says $1.259 to buy a Euro. That's almost a 25% savings over my last trip in March. Between that and the price of gas here in the US, I might make up the damage to my IRA in 20 or 30 years!

The financial panics in other parts of the world has devastated the local currencies, the increase in value of the dollar reflects a lack of better options for currency investors. The dollar strengthens when real interest rates rise versus the real interest rates relevant for other currencies. The real interest rate is the interest rate minus inflation. When real dollar rates are high, or expected to rise, then investors sell the home currency to buy dollars in order to benefit from those relatively higher real interest rates. The government will sell bonds to raise money to resolve the recent financial crisis. This will drive interest rates higher so people are buying the dollar to speculate on these higher rates driving the value of the dollar higher. When the crisis ebbs, investors will focus on other issues again, and the dollar will resume its downward course.

Dollar Vs. Euro

Month by month rate going back to Jan. 1999
http://research.stlouisfed.org/fred2/data/EXUSEU.txt

April 2006 is the last time it's been this low.

Wow .. You know , I never really was that interested in the financial markets even being a money market trader in London... It was work ! But now i'm on the sidelines i'm actually enjoying listening to what's happening in the financial markets .
A senior economist ( I think from Wachovia Bank ) was on the BBC today to give reaction to the Fed's lates 50 basis point reduction in the base rate . He made an interesting point about the future of the dollar which I would have to agree with :
He said , that now the base rate in USA is 1.00pct ... the lowest in maybe 4 or 5 years .. There's a good chance they'll cut by another 50bp .. but they have little room to manoeuvre now .
The Bank of England and the European Central Bank are really just starting their interest rate cuts ( they should follow the Fed's move very soon ) .
The exchange rates between the Euro and the pound against the Dollar will be a little volatile but will favour the Dollar right now based on the interest rate scenario .
I would also argue that , what seems an imminent win for Barack Obama , this week will also boost the Greenback .
To quote ( roughly ) a politician on UK TV : " If you were looking at the Earth from space you would see the World collectively holding it's breath in anticipation of Barack Obama becoming President " .
So to finish , I'd say you guys in the USA are going to be on the right side of the exchange rate if you're heading here to Europe . The Dollar's looking good for now .
Steve

I sure hope so, the right side of the dollar will be great or my trip in December...I'm just not sure when to exchange monies to get the best rate before my trip....

I have wondered if the Bush administration supported the weak dollar as it improves U.S. trade imbalances, helping prop up the stock market and worried investment bankers, and strengthening American companies in many regards. Usually , the weaker dollar will allow American companies to sell more overseas but the lower interest rates create a situation where they can borrow here cheaply and expand their reach while European competition is paying higher rates for capital and also having a harder time selling goods and services. But according to Professor Alan Greenspan, they did not see the subprime crisis coming despite an era of record low interest rates. Any change in the value of the dollar after the election will be an emotional one, then the value of the dollar will be determined by supply and demand in the foreign exchange market. Although policy makers can influence the value for short periods of time by altering the supply and demand, there is no evidence that the value of the dollar can be determined and maintained against market forces intent on establishing a different value.