Strong Dollar Means Big Discounts for Americans Traveling Overseas
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Here's your money briefing for Wednesday, October 12th. I'm J.R. Whelan for The Wall Street Journal. That $1 bill in your wallet is worth $1. But when stacked up against the current value of some foreign currencies, it's actually worth more. And that means the potential for scoring some great deals in hotels, restaurants, and stores if you travel overseas.
Travel advisors tell me that now is the best time we've probably had in 25 years to travel internationally if you look at Europe, Japan, and the U.K.
Coming up, our travel reporter Allison Pohle will take us through the math that's allowing Americans to enjoy some R&R abroad at a discount. That's after the break.
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Flights, meals, not to mention the shopping.
How is a strong U.S. dollar creating bargains for Americans traveling abroad?
With inflation at 40-year highs, the cost of a trip pretty much anywhere in the U.S. can add up quickly. But the strength of the U.S. dollar against foreign currencies is leading many Americans to look overseas for their next trip and shop till they drop. Wall Street Journal travel reporter Alison Poley has been running the numbers, and she joins us to discuss. Alison, thank you very much for being with us.
Glad to be here.
So, Alison, help us understand in basic terms how this works. Why has the U.S. dollar risen in value against many foreign currencies?
The dollar is extremely strong and it's being fueled by the Fed's interest rate increases. So that has encouraged global investors to pull their money out of other markets to invest in higher yielding U.S. assets. So data shows that inflation in the U.S. is still stubbornly high, which makes the case even stronger for more Fed rate increases. And that means an even stronger dollar. On top of that, there are also pretty tough economic conditions in other countries. So if you look at the case of the euro, it's been weakened by the war in Ukraine and other problems affecting Europe's energy supplies and economy.
So how much further does a dollar go abroad nowadays?
If you look at the past six months, the value of the euro and the pound and the Japanese yen has decreased compared to the dollar. So the euro was at parity with the dollar in recent months. And if you look at just this week, the pound was $1.11, which is off about 15% against the dollar compared to six months earlier.
And so what does this mean for Americans making travel plans?
Travel advisors tell me that now is the best time we've probably had in 25 years to travel internationally if you look at Europe, Japan, and the UK. But it's also important to remember that prices in those countries have gone up, but prices in the US have gone up too. So it can be advantageous for travelers who are heading abroad to take advantage of those exchange rates that are happening right now as the dollar is strong against devalued yen, euro, and pound.
Now, you've spoken with several people who've made travel plans to take advantage of the dollar's strength. What was their experience?
I spoke to one couple who recently went to London.
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