Gulliver | Currencies and tourism

The power of the almighty dollar

What you need to know about travelling for business when the dollar is this strong

By N.B. | Washington, DC

"THIS is a great time for Americans to travel internationally," the Washington Post proclaimed last month. The main reason? The strong dollar. Russia is now a much cheaper place for Americans than it was a year ago but, of course, there's less reason for business travellers to go there since the harsh sanctions were introduced. More significant is the dollar's strength versus most European currencies, in particular the Euro.

But all is not as it seems, explains Evan Soltas, an economics blogger. A strong dollar, he argues, doesn't have much influence on Americans' travel habits. But it does make foreigners less likely to come to America:

In fact, for every one-percentage-point increase in the dollar's value (as measured by the real trade-weighted exchange rate), foreigners' travel spending drops by half a percentage point. And those cutbacks happen immediately after the shock to the exchange rate.

...[I]t doesn't look like Americans spring for foreign vacations when the dollar is strong. Yet foreigners do notice a strong dollar, and they respond by traveling less or spending less when they do come. One wonders, though, why Americans don't get their acts together and game the exchange rate like the rest of the world.[Emphasis added]

There is an obvious reason why Americans don't pay as much attention to exchange rates as citizens of other countries do: they travel abroad less. Around a third of Americans hold passports, compared with three-quarters of British citizens, for example. America is huge; there is a lot to see, and a lot of business to do, within its borders. If you are a businessman in Oklahoma City, why worry about the exchange rate in Sweden (which has a population of about 10m) before making sure you have maxed out your business in Texas (which has a population of about 25m)? Still, the Post's advice is well taken. Now is an excellent time to visit Europe.

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