by Eloy Yndigoyen (The Campus Investor)
Going abroad to Europe next semester? Maybe Australia or Brazil? Wherever you end up you will be remembering the popular complaint amongst our grandparents “A dollar just ain’t worth what it used to be.” Many of you might be thinking what do I care what a dollar is worth; it’s not my money anyway. Well, you have a point but you will have greater purchasing power overseas when you have a stronger dollar at home and you will sound more intelligent when discussing how much $ you will need when abroad.
Alright so how’s the dollar been doing and where will it be during the next six months? In the past three months the dollar has made a comeback vs. the Euro as our economy has picked up steam and credit problems have been exposed in the Euro Zone (ex Greece.) However, prolonged dollar weakness has been the theme ever since the Euro was introduced, with few exceptions, one being the credit crisis when we had a flight to quality meaning everyone freaked out and ran to the safest currency around aka the US Dollar.
Since most of you are leaving within the next few weeks for the spring semester in 2010 I will give you my analysis of the situation along with what’s been heard on the street. The US Dollar is likely to continue its way up, albeit at an extremely slow pace and possibly trade in a 2-4% range over the next few months. Remember, a stronger dollar means greater purchasing power while you’re “studying.” The Federal Reserve will begin raising rates most likely in the 2nd half of 2010 and since investors are anticipating this move and a stronger economy, they will continue to bid up the dollar against other currencies. One piece of bad news for those of you traveling to emerging markets (Brazil, Mexico etc) I believe the dollar will continue to see weakness vs. these countries since the US will not grow as fast as these EM’s will. Many economists think the USD will continue its downward slope while others are seeing a strong USD for 2010. The main risk to these assumptions is a double dip recession, meaning we go back to where we were last March. Who knows what will happen then?! Will investors come back to the USD in another flight to quality or will they question the quality of our currency since our economy will be showing signs of weakness yet again. It all remains to be seen folks.
Following currencies is an extremely smart way to see which countries are positioned and forecasted for future growth, along with knowing where you will get the most bang for your buck on vacation. You can track currencies on Yahoo Finance (http://finance.yahoo.com/currency-investing), be sure to check out the numbers before you leave so you know how much money to bring! Have fun and enjoy your trips.
Currency Conversions as of 12/21/09
$100 USD = 69.98 €uros
$100 USD = 113.4 Australian Dollars
$100 USD = 62.3 ₤ British Pounds
$100 USD = 379.57 Israeli Shekels
$100 USD = 178.4 Brazilian Real’s
