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It’s a good time for Americans to travel abroad.
The value of the US dollar has been the highest in recent years compared to many major world currencies these days. This means travelers can buy more abroad than they do these days.
In other words, Americans are effectively discounted on hotels, car rentals, tours and many other foreign currency denominated goods and services.
However, it is unclear how long the good times will last. Some may wonder: should I now act to fix a favorable exchange rate?
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“I’ll trigger now,” said Aiden Freeborn, senior editor of travel site The Brooke Backpacker.
“You can hedge and wait for the situation to improve, but that can backfire,” he added. “Don’t be too greedy. Accept the fact that this is a very powerful position.”
Here’s what you need to know and how to take advantage of it.
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How much discount do travelers get now?Let’s see Euro As an example.
The euro (19 official currencies of the 27 European Union member states) has fallen in value last year or so, equating to the US dollar on 13 July. For the first time since 2002.. Parity means that the exchange rates of the two currencies are 1: 1.
At the end of the market on Tuesday, Americans were getting a discount of about 13% from a year ago, despite a slight rebound from their decades lows.
“Current exchange rates are ridiculous,” said Charlie Leocha, chairman of advocacy group Travelers United, about the euro’s slump. “This makes everything in Europe that was previously expensive less expensive.”
But the strength of the dollar is not limited to the euro.
for example, Nominal Broad US Dollar Index In addition to the euro, it measures the dollar’s rise against the currencies of major US trading partners such as the Canadian dollar, British pound, Mexican peso and Japanese yen. Last year it increased by more than 9%.
In addition, according to Andrew Hunter, senior US economist at Capital Economics, the index is near its highest point, dating back to at least 1973. There is one exception. It had little access to international travel during the period March-May 2020 due to the Covid-19 pandemic.
“I think the big picture is probably a good time to go abroad,” Hunter said. “Basically, now is a good time to buy foreign currency.”
Hunter explained that the strong dollar was due to three main factors.
Probably the most important Federal Reserve Board Campaign to Raise Interest Rates (That is, borrowing costs). According to Hunter, central banks were more aggressive than other banks around the world. Dynamics creates an incentive to keep money on dollar-based assets, as international investors generally get higher returns.
In addition, soaring oil prices this year have hurt the growth prospects of some developed countries (especially Europe) compared to the United States, and factors such as economic uncertainty (inflation, fear of recession, war in Ukraine, etc.) According to), investors are a safe haven asset like US dollars.
According to Hunter, the US dollar is likely to remain high for the next six months, but given the dynamics of the economy, it is likely to be at or near its peak compared to other major currencies. ..
“You always have uncertainty about what will happen in the future,” he added. “The dollar could rise further, but it could fall,” he said.
Nagaya in Weissgerbergasse, Nuremberg, Germany.
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Of course, this isn’t just about saying that Americans get financial rewards around the world.
However, according to travel experts, tourists planning or considering a trip to a country where the dollar is historically high should book a hotel, car rental, or other service today instead of postponing costs. You can fix the favorable exchange rate with.
This is especially valuable for those traveling at least three months in advance, Leocha said.
“You can get discounts and lower exchange rates because you can pay in advance and sometimes get discounts in advance,” he said.
Note: There may be additional international transaction fees for purchasing credit cards abroad. Some travel cards eliminate these charges, which generally represent 3% of the purchase price, Leocha said.
Fees may vary depending on the location of the company of the business partner. There are no foreign transaction fees if the purchase is made through a third-party US entity such as Expedia, but it is often booked directly through a foreign entity such as a real hotel, Leocha said. Said.
According to travel experts, travelers can also redeem cash before the trip, but usually only need to redeem the trip a few months in advance.
This is because providers such as banks usually offer more generous exchange rates. In other words, it may be possible to serve customers by waiting until they arrive in the destination country and making a purchase with a credit card, especially if there are no foreign transaction fees.
While abroad, the merchant may offer travelers the choice of purchasing “with or without conversion” or following the prompts of similar words.Traveler You must reject that conversion offer According to experts, in order to get the best exchange rate, you should choose to trade in the destination currency instead of converting the price to dollars.
According to Freeborn, travelers wishing to convert to cash hedge their exchange rate bets by converting half of their estimated spending now and waiting later (or until they arrive) to hide the rest. can do.