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Cashing In on the Strong Dollar

SmarterTravel

By now you’ve probably seen several reports about how a sagging euro and dropping “Loonie” are making travel to Europe or Canada look good this year. And they’re right, but that’s just part of the story. Compared with July 2014, currencies in a bunch of important visitor destinations have dropped a lot.

North America

The Canadian dollar, or “Loonie,” is currently 14 percent below where it was last summer. Unless it suddenly gains a big share of that loss, you should expect some good hotel and restaurant values north of the border. And whether you like exciting cities or great scenery, Canada has a lot to offer; Montreal, Quebec, Toronto, and Vancouver, or, if you prefer, Victoria, Jasper Park, the Laurentians, and Gaspe.

The story is a bit different in the rest of North America. Yes, the Mexican peso is also down 14 percent, but the main Mexican visitor centers tend to price to the dollar rather than to the peso. Similarly, the separate nations in the Caribbean pretty much price to the dollar no matter what their local currencies do—even where their currencies are not officially tied to the dollar.

Europe

Yes, the euro is down 23 percent, and that’s enough to make a substantial reduction in the cost of a visit. But it’s not only the euro: The Swiss franc is down 18 percent to 1.03 to the dollar, a big help in that notoriously expensive but notoriously beautiful country. The U.K. pound is faring better than the euro, at 12 percent below last year—and even with that advantage, London will remain very expensive.

Other remaining national currencies in Europe are also down, with some strings. The Icelandic krona is down 16 percent, but hotels and restaurants don’t seem to be giving visitors the benefit of the drop. Even with a 20 percent drop in the krone, Norway will remain extremely expensive. And the 44 percent drop in the Russian ruble clearly reflects the tensions over Ukraine and is equally clearly having a depressing effect on Russian tourism.

The other offset is what are expected to be high airfares. Currently, British Airways is quoting a stiff $1,784 for a nonstop round-trip from New York to London in mid-July. Paris looks better, with nonstops from New York at $1,030. West Coast travelers will also face some stiff bills: From San Francisco to Paris, you’ll pay $1,780 for a nonstop. But you can cut most nonstop prices by as much as $700 by accepting a stop along the way.

Asia

Asia is a mixed bag. The Japanese yen is down 15 percent, but currencies in other main visitor destinations, including India, Korea, Singapore, Taiwan, and Thailand, are down only about 4 percent to 8 percent. That’s nice, but not as big a deal as the euro. And the Hong Kong dollar is pegged to the U.S. dollar and remains at a rate of 7.75.

South Pacific

The Australian and New Zealand dollars are down 17 percent and 14 percent, respectively. That’s enough to make a goodly difference in the cost of a visit. But you’re looking at some long, expensive flights, and July and August are winter months.

The Outlook

“Will the dollar keep gaining, or will those foreign currencies rebound?” That’s a key question—summer is still four months away—but it’s one I won’t even try to answer. After all, I’m a travel writer, not a currency speculator. But from what I can see, the speculators aren’t expecting any big changes in either direction: The “long” and “short” euro-dollar positions are near the 50-50 mark. I have seen some economists’ pronouncements that the pound is “overvalued,” but that does not mean anyone is expecting it to drop anytime soon.

The dollar is strong now partly due to unsettled conditions in so much of the world, so unless you expect peace to break out suddenly, I suspect the currency situation won’t change much between now and July. But, as I say, I’m not a currency speculator. Decide for yourself which way you think the dollar will go.

Ed Perkins Seniors on the Go is copyright (c) 2015 Tribune Media Services, Inc.

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