U.S. dollar stronger amid Brexit, eurozone turmoil; travelers benefifiting
PITTSBURGH — A hotel room in Paris priced at 150 euros during the holiday season of 2013 would have cost American travelers $205. But the same hotel room this holiday season would cost Americans only about $160.
Americans traveling overseas are getting more bang for their buck these days when it comes to the spending power of the venerable greenback against traditional powerhouse currencies such as the British pound and euro.
The lingering effffffffffffects of the British government deciding to leave the European Union and the potential for further erosion of the eurozone has knocked the once- dominant euro to its lowest point in more than a decade. Meanwhile, the Federal Reserve Board has increased U.S. interest rates, which is likely to give the dollar even more weight against other currencies.
“T h e d o l l a r h a s b e e n strong for a couple of years, but the exchange rate this year gives American tourists lots of spending power overseas this holiday season,” said Bill Adams, senior international economist at PNC Bank. “The strong dollar is not just a European story. The dollar’s purchasing power also is stronger in other countries such as Mexico, Canada, Japan and China.”
According to PNC Bank’s economics division, the U.S. dollar has appreciated 23 percent against the euro since 2011, when the exchange rate was 1.30 per euro. The exchange rate today is $1.04 per euro.
The Canadian dollar also has fallen 22 percent against the U.S. dollar since 2011 when 1 U.S. dollar could buy 1.03 Canadian dollars. Today, $1 can buy 1. 35 Canadian dollars.
The dollar’s exchange rate appreciation against the Japanese yen has been even more dramatic since 2011 — 46 percent. The rate was 78 yen for $1 in 2011; today the exchange rate for Japanese yen is 117.6 yen for 1.
For years, the U.S. dollar had been steadily weakening against other major currencies as the country’s national debt continued to rise and its interest rates fell.
But the dollar began picking up steam in 2015 in anticipation of the British government leaving the European Union. More political turmoil is expected to affffffffffffect the euro now that Italy’s prime minister submitted his resignation after a no” vote on his constitutional reform proposals.
Financial adviser Paul Bra- him, chairman and CEO of BPU Investment Management in Pittsburgh, believes the dollar has rallied recently in part due to the Trump effffffffffffect of investors expecting a looser regulatory environment and lower corporate tax rates.
And money tends to flflow to currencies that pay the highest interest.
“Money moves from uncertainty to certainty. And right now there is so much uncertainty in the eurozone, those dollars are coming here,” Brahim said.