Make the Strong Dollar Work for You
Go “down under” for big deals -- or save with krones and dongs? When planning your summer vacation, let foreign exchange rates – and international deals -- dictate your destination.
We look forward to a summer vacation, a time for leisure, adventure and exploration. While many of us will inevitably return to our favorite U.S. beach, city or national park, others will venture outside the country to enjoy the purchasing power of what is currently a very strong U.S. dollar.
Andrea Caralis, PNC Capital Markets’ director of foreign exchange, works with companies to manage the inherent risks associated with currency and doing business globally. While her corporate clients frequently take advantage of exchange rates – or the value of one currency against another – this business savvy applies to vacation planning too.
Depending on their destination, Americans today can travel abroad without breaking their wallet. It is smart to convert some money to the local currency before leaving on a trip.
When asked where to get the most bang for the buck, Caralis offers the following suggestions while noting that exchange rates are subject to sudden changes (these rates are as of May 11. See sidebar for more details):
Speak the Language of Savings ($1 U.S. = $1.35 Australian dollars)
“For those who want to visit an English-speaking country, Australia, Canada and New Zealand are very attractive options,” Caralis said. “Because the exchange rate in Australia is about 30 percent weaker than it is the United States, Australian goods are essentially 30 percent off.” The same can be said of New Zealand and Canada, where the exchange rate is 20-30 percent lower than the U.S.
Traveling Scandinavia ($1 U.S. = 8.16 Norwegian krone)
While Norway, Sweden and Denmark may not appear at the top of many travel lists, they are becoming increasingly appealing due to their rich culture, beautiful landscapes and weak exchange rates against the U.S. dollar, which are at six- to eight-year lows. “Due to their economic dependency on oil and natural resources, whose value is at historic lows, these countries are targeting tourists who might otherwise visit London, Barcelona and other – and more expensive – European cities.”
Scandinavian countries are a cheaper option compared to some European cities
Smart Money in Mexico ($1 U.S. = 17.91 Mexican pesos)
Its pristine beaches and weak peso, which is at an all-time low, make Mexico another affordable and attractive travel destination.
Spending Spree in Southeast Asia ($1 U.S. = 22,296.50 Vietnamese Dong)
Thailand, the Philippines and Vietnam are becoming increasingly popular because of their favorable exchange rates and the overall buying power of the U.S. dollar. “Often due to high interest rates, which are designed to fight inflation, many third-world countries have relatively volatile currencies,” Caralis said. “The impact of currency volatility paired with U.S. dollar strength has brought emerging market rates to dramatic lows.”
High interest rates in Southeast Asia mean more U.S. dollar buying power
Ready for a vacation? See more tips for a money-smart vacation.
PNC Capital Markets helps companies to understand exchange rates for international deals.
Andrea Caralis says the strong U.S. dollar means international travel deals
Bill Adams says travelers should monitor their destination’s exchange rate online
How Does Money Rate?
PNC’s Senior International Economist Bill Adams says exchange rates change constantly based on seven main factors:
- Macroeconomic performance: How well a country’s economy delivers growth, creates jobs and controls inflation
- Trade imbalance: A country’s imports vs. exports
- Monetary policy: A Central Bank’s actions to influence the money and credit in the economy
- Fiscal policy: A government’s adjustment of spending and taxes to support growth or cut deficits
- Political events: Sudden changes in government, trade pacts, etc.
- Unforeseen events: Natural disasters, interest rate changes, etc.
- Sentiment: Positive or negative opinions of capital market investors that impact business and trickle down to consumers
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