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What the dollar-euro exchange rate means for Americans in Europe

The euro sunk below $0.99 on September 5th, marking a 20-year-low for the single currency against the dollar. Here is what that means for Americans in Europe.

What the dollar-euro exchange rate means for Americans in Europe
Photo by Ibrahim Boran on Unsplash

The euro fell 0.70 percent to 0.9884 dollars on Monday September 5th at 0535 GMT, its lowest since December 2002.

Earlier in the summer the currencies had already reached parity with US news outlets are deeming it a “good time to be an American in Europe.”

For Americans who went on holiday in Europe this summer, they could rejoice over wine, taxi rides, and even luxury items being “cheaper than they have been in decades” all thanks to a strong dollar. 

According to American news outlet, CNBC, the near drop in the euro meant that Americans “travelling to one of the 19 European Union countries that accept the euro” will get a “15 percent discount on purchases today relative to a year ago due to the exchange rate.”

But the benefits are not just for American tourists – Americans residing in Europe, as well as European tourism sectors, stand to gain from the exchange rate too. For the tourism industry in Europe, which was hit hard by the Covid-19 pandemic, the weak euro might actually be beneficial, as it might entice more American tourists to spend their holidays here.

For tourists

Americans had become accustomed to budgeting extra for European vacations when taking the exchange rate into consideration. In 2008, the New York Times reports that a €5 glass of wine might have cost Americans the equivalent of $8, compared to the $5.20 it might cost today. Here is what Americans wanting to get a good bang for their buck in Europe this summer should know: 

First, it might not be advisable to go book your trip right now simply because the exchange rate is advantageous for American travellers. Willis Orlando, a travel specialist at Scott’s Cheap Flights told CBS news that “other factors like large crowds still mean higher prices at hotels.”

Unfortunately airfare and lodging are more expensive this summer than they were last year (up 20 to 60 percent in some markets) due to high demand and inflation. On top of that, the airline industry is in crisis, attempting to handle staff shortages and high volumes of tourists, which has led to strikes, cancellations, and long-wait times in airports across Europe.

READ MORE Airport chaos in Europe: Airlines cancel 15,000 flights in August

However, if you do have a trip planned already, you can look forward to your dollar going a longer way at restaurants, stores, and when shopping.

If you want to maximise your benefits from the currently favourable exchange rate, you can take a few money-saving steps:

Use an ATM to withdraw local currency – Instead of converting dollars to euro at the airport or at a conversion teller, who will charge a commission in addition to the exchange rate, simply use an ATM once in Europe. 

Pay with your credit cardForbes recommends this for American tourists, but when paying with your credit or debit card beware of foreign transaction fees. Also be aware that many businesses in Europe do not accept American Express. Another tip is to pay in ‘local currency’ when using your credit card, as if you pay with dollars you could wind up with a conversion fee. 

Consider pre-booking – If you want to lock in the current exchange rate, then consider prepaying for your trip. However, you might not need to do this, as the dollar is expected to “remains strong for months to come,” according to CBS News.

Take advantage of tax-free – The Value Added Tax (VAT) is the sales tax in Europe. If you spend over a certain threshold of money at a single store, you can request a tax-free form to receive a refund on the VAT. You can file this form at the airport or train station when departing.

For Americans living in Europe

The close exchange rate is beneficial for Americans who are residents in Europe as well. The principle is the same – for example, if you have a rent payment coming up, and you have been wondering about the best time to transfer money from your American account to your European bank account, consider doing so now. Your American dollars gaining value means they will go a longer way than they did even just six months ago. If you want to transfer a large sum, check with your American bank account to see what the maximum transfer amount is prior to doing so. 

The euro-dollar rate also benefits Americans residing in Europe who might be looking to buy property in France, as well as those who have any income dollars, whether that be in salary, pensions, or investments. 

Of course, for Americans living in Europe and making their income in euro, the opposite is true that travelling back to the United States will be more expensive now than last year. In this case, it would be worth considering locking in your rates by prepaying for bookings.

The dollar will likely remain strong for the next few quarters, as its value-increase is due to the Fed raising interest levels in the US, making it more attractive for investments than Europe, who is currently suffering from a shortage in gas supplies due to the ongoing war in Ukraine. 

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TRAVEL NEWS

Driving in France: Motorway tolls rise from February 1st

The cost of using France’s motorway network rose by a below-inflation average of 4.75 percent on Wednesday, February 1st.

Driving in France: Motorway tolls rise from February 1st

Going through the toll booths on France’s motorway network now costs more – though the average 4.75 percent increase remains below inflation, and is lower than the price rise of between 7 percent and 8 percent predicted last September after Transport Minister Clément Beaune called for “reasonable increases”.

“We are well below the reference inflation rate of 6.33 percent,” Vinci Autoroutes, which manages nearly half of the French network, said in a statement.

Even so, motorists may not appreciate the motorway companies’ efforts to ease the effects of the cost of living crisis, as prices rise unevenly across the board.

A journey from Toulon, in the Var, to Mandelieu, in Alpes-Maritimes (113km) now costs €13 in tolls, up from €12.10 in 2022 – an increase of 7.4 percent.

Drivers heading between Lyon and Montpellier now have to pay an extra €1.90 to make their journey, up 6.7 percent on last year’s prices; and motorists will have to pay an additional €2.10 to make the five-hour journey along the A4 between Paris and Strasbourg.

In recent years, the annual rate of the annual increases has been lower. Tolls went up 2 percent on average last year, and just 0.44 percent in 2021. The annual increases are based on a formula that takes into account the rate of inflation and the amount of maintenance work undertaken, which is written into the motorway operators’ contracts with the government.

For home-work trips, Vinci Autoroutes has frozen the prices of 70 percent of trips of less than 30 km, as well as “half of trips of less than 50km and the bypass routes of 35 towns”.

The stretches between Aubagne and Cassis (Bouches-du-Rhône) on the A50, between Villefranche-de-Lauragais and Toulouse sud (Haute-Garonne) on the A61, and between Orléans nord and Olivet (Loiret) on the A10, for example, will see no price increase.

Subscribers to the Ulys 30 electronic toll system, meanwhile, now receive 40 percent concessions, compared to 30 percent previously on their regular commuter route.

According to Vinci, for every €10 in tolls, €4 is then paid to the government in taxes; €3.50 covers maintenance, modernisation and operating costs; and the remainder repays investors and services debts.

However, motorway operators are regularly singled out for the scale of their profits, recorded at €3.9 billion in 2021, 11 percent more than in 2019. 

If you’re driving in French towns and cities, remember that you may need a Crit’Air sticker – full details HERE.

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