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 The Brancatelli File

joe THE INEVITABLE RETURN
OF THE ALMIGHTY DOLLAR


BY JOE BRANCATELLI

July 15, 1999 -- Europeans in the 11 nations who tied their currencies to the value of the euro were figuratively dancing in the streets on New Year's Day. American travelers whose dollars were eroding in value and whose expenses were ballooning found themselves hoarding pennies.

When the euro debuted on New Year's Day, it promptly surged to about US$1.17 on world currency markets. Europeans were crowing--and predicting the euro would soon be worth $1.25. They were also gleefully suggesting that Americans would have to part with more of our greenbacks if we wanted to sip a Pernod on the Left Bank, gulp an espresso on the Grand Canal or drain a pint of beer in a Munich bierstube.

What a difference a few months make. The Kosovo conflict knocked the metaphoric legs out from under the euro and it has plummeted to about US$1.03. And since the Belgian franc, German mark, French franc and Italian lira and the seven other euro-dependent currencies move in lockstep with the euro, the value of the dollar has risen sharply all over Europe.

Now, in mid-July, it is the Europeans who are hoarding small change and the Americans who are dancing. The dollar is Almighty again all over Europe. And U.S. travelers heading for the continent will find bargains galore.

"The dollar is probably worth more in Europe now than at any time in the last ten years," says Kendra Alonzo, an analyst for a London-based bank. "That means a bonanza for summer travelers. Meals are cheaper, hotel rooms are less expensive and Europe's best shops look like a flea market to Americans."

Even if you're oblivious to the relative values of currencies, says Alonzo, "a 15 percent shift over just a few months is something everyone sees and feels. You can't help but notice how cheap the Champagne is, what a bargain a good hotel room has become."

The rapid recent decline of the euro may even have long-term consequences. Some experts say that the dollar and the euro will soon trade at parity. In other words, one dollar will be worth one euro. Eventually, pundits suggest, the one-to-one ratio may be officially locked in.

But the dramatic eclipse of the euro is only part of the story for travelers. As you can see from the chart, the dollar actually has been surging in value in Europe for almost four years. After hitting a rough patch in the spring of 1995, the U.S. dollar has jumped around 40 percent against the Swiss and Belgian francs and gained about a third in value against the currencies of France, Spain and Finland. The dollar has even jumped a remarkable 37 percent against the once-impregnable German mark.

One final note: The dollar is once again almighty in continental Europe. In the United Kingdom, however, the pound remains extremely strong. In fact, the U.S. dollar buys only about 62 pence. That makes Britain expensive this summer.

THE ALMIGHTY DOLLAR CONQUERS EUROPE AGAIN

Value of $1 in

Spring 1995

July 1999

Gain

Austrian Schilling*

9.69

13.21

36%

Belgian Franc*

28.00

38.74

39%

Danish Krone

6.10

7.14

17%

French Franc*

4.80

6.29

31%

Finnish Markka*

4.30

5.70

32%

German Mark*

1.37

1.88

37%

Hungarian Forint

119.60

244.60

104%

Irish Punt*

61.33

77.20

26%

Italian Lira*

1706

1898

11%

Spanish Peseta*

121.85

159.79

31%

Swiss Franc

1.10

1.54

40%

*Currency’s value tied to the euro.


This column originally appeared at Ticked.com.

Copyright © 1993-2004 by Joe Brancatelli. All rights reserved.