The U.S. Dollar Is Giving Some Travelers More Spending Power
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Here's your Money Briefing for Friday, May 24th. I'm J.R. Whelan for The Wall Street Journal. Inflation in the U.S. might give you second thoughts about planning a summer vacation this year. But outside the U.S., the exchange rate between the dollar and several overseas currencies could tilt the numbers game in your favor.
It's a really great time to go because you might, you know, actually feel wealthier in some of these countries and be able to enjoy great meals in restaurants, all-day spas, things that you really couldn't dream of affording in the U.S.,
Wall Street Journal reporter Katherine Hamilton will join us after the break.
The strength of the U.S. dollar against some foreign currencies means Americans can score some sweet deals while traveling this summer. Wall Street Journal reporter Katherine Hamilton joins me. Katherine, can you take us through this process for a moment?
Why are higher U.S. interest rates pushing up the dollar's value?
How does the U.S. dollar or any legal tender change in value versus other currencies?
The thing to really focus on, especially for the U.S. dollar right now, is interest rates. So as a lot of us know, interest rates in the U.S. have gone up a lot over the past year or two. And because of that, investors from other countries are more interested in buying the dollar, investing in the dollar, because that means that they're going to get a higher yield.
But that doesn't mean the dollar in your pocket changes value, right?
Right. So the value of the dollar is all based on the international stage. So we're talking about the dollar index here, which is a measurement that compares the dollar with a group of foreign currencies. So you can look at the dollar's strength against any foreign currency. And in countries where the local currency is particularly weak, the dollar is going to go extremely far.
In the case of the US dollar, how would that make it more affordable to someone to travel to and purchase items in another country?
So you can look at individual countries' local currencies to see how they compare to the dollar. So the dollar is strong, but then in other countries, like, for example, Argentina, their currency is very weak.
How does the dollar index measure strength versus other currencies?
Their currency has actually weakened a lot over the past five years. So right now is an especially good time to travel there. And there are a few other countries that are also in that same boat.
What's made it a good time now to travel to Argentina?
So in Argentina, their peso has declined. And so the dollar is actually worth about 1900 percent more than it was in 2019.
So somebody goes to Argentina, get a hotel, they want to do some tourism and such. How will they see this dollar versus the peso comparison play out when they actually have to buy something?
I spoke to one woman who was there in February, and she bought this great dinner. They had ribs, steak, a bunch of appetizers, wine, and it came to just $60. So I think that's an example of, obviously, that's going to be a lot more expensive here in the U.S., pretty much anywhere.
Okay, I can attest to this. I was in Argentina last fall.
It's a nice surprise.
But it doesn't last forever.
Right. It definitely fluctuates a lot. Obviously, the dollar fluctuates in strength, and then those local currencies also fluctuate. There are certain countries that are often a good deal.
What are some other countries?
How does a stronger dollar make travel cheaper in countries like Argentina?
So the other countries right now that are especially a good deal to go to are Japan and Hungary. Japan is another one where their currency has gotten weaker in the past couple of years. And right now, basically, $1 is equivalent to 156 Japanese yen.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:15
2
How does the U.S. dollar's recent strength affect travel planning?
0:15–1:36
3
Why are higher U.S. interest rates pushing up the dollar's value?
1:36–2:53
4
How does the dollar index measure strength versus other currencies?
2:53–4:02
5
How does a stronger dollar make travel cheaper in countries like Argentina?
4:02–5:50
6
What savings did travelers report in Japan and how did exchange rates help?
5:50–7:23
7
Why is Hungary currently a budget-friendly destination for U.S. travelers?
7:23–7:54
8
Where can travelers check currency values and historic exchange-rate data?
7:54–8:16
Speakers
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