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TRAVEL INSIDER : Exchange Rates Favor Americans in Europe : Currency: The U.S. dollar has more value than it's had in years . . . and the trend is expected to continue.


It's hard to say how many travelers plan their vacations according to the rise and fall of the dollar. But right now, it's easy to tell those travelers where to go.

Europe. Since last fall, the dollar has been gaining buying power against European currencies. And on Aug. 2, leaders of the European Monetary System loosened limits on trading rates, a move likely to lower interest rates in several countries. That, analysts say, is likely to give the dollar even more muscle in the months ahead. Even if you don't think much about exchange rates when planning a trip, this could be a good time to start doing so.

When this month began, the dollar was at an 11-year high against the Greek drachma, a 10-year high against the Swedish krona, an eight-year high against the Spanish peseta, and a six-year high against the Italian lira.

"It's certainly great news for people going over to Europe," said Deborah Cooper, spokeswoman for the European Travel Commission in New York.

Yes, it's true that she is paid to say such things. And it's also true that in this space five months ago, I warned that travelers should look beyond Europe's newly attractive exchange rates and ask about the cost of restaurants and hotels. Many of those businesses boosted prices so high in the late 1980s that a little currency devaluation still wouldn't have offered Americans much comfort.


But since March, the exchange rates have continued to improve, and the tourist businesses don't seem to have kept up. Some real-world examples:

London: The Rembrandt, a 196-room hotel near the Victoria and Albert Museum and Harrods, last summer was asking undiscounted standard rates beginning at 123 pounds for a double room--or about $245 nightly. A year later, that "rack rate" has crept up to 125 pounds--but weakening of the pound against the dollar means that Americans can get into that room for about $186 nightly.

Paris: Last summer, the Hotel le Ferrandi, a 42-room, lodging in the 6th arrondissement , was asking rack rates starting at 550 francs (about $115) nightly for a double room. This summer, the rate is the same in francs, but the translation for Americans is about $95.

Frankfurt: The Sheraton Frankfurt Hotel, a 1,050-room property that neighbors the city's international airport, last summer listed its double-room rack rates at 345 marks (about $245) nightly and up. This summer, the same rooms start at 370 marks--about $215.

(Travelers should remember that organized tours and package deals often deliver hotel rooms at substantial discounts.)

"You can't really go wrong as far as exchange rates go right now," says Bob Dowd, a corporate dealer with Thomas Cook Currency Services. But Dowd warns against "going over there and expecting everything to be dirt cheap."

Drawing on figures from Ruesch International Financial Services, the European Travel Commission notes the following increases in the dollar's trading value over the 11 months ending July 30. Travelers should keep in mind that these numbers are used by traders dealing in volumes of $1 million or more; rates for individual travelers are usually 2%-5% less advantageous, and vary from institution to institution. (Hence the differing figures in rates quoted by Thomas Cook Foreign Exchange on this section's Travel Statistics page.) But these trends in valuation are reflected in consumer rates.

Between June 1 and July 30 alone, figures from Ruesch International show the dollar gained almost 10% against the German mark, 11% against the French franc and 16% against the Spanish peseta. Even though the dollar made massive gains (more than 30%) against the British pound and the Italian lira last fall, it gained a bit more this summer. In June and July, the dollar rose 5% against the pound and 10% against the lira.


As is usual with economic subjects, the details behind the trend can be mind-numbing. Here are the broad strokes:

Europe's economies are weak these days, so weak that in a bid to boost economic activity, Italy and Britain broke ranks last fall and cut their interest rates beneath levels agreed upon by the European Monetary System. By the time late July arrived, the French franc, Danish krone and Belgian franc were also struggling, and finance ministers around the Continent were hoping that the mighty German Bundesbank would lower its interest rates, thereby allowing rate cuts around Europe.

The Germans didn't budge. In response, the other European nations rewrote the system's rules to allow interest rates to vary widely from country to country.

Interest rates around the Continent are now expected to fall--some have already begun to--and many authorities agree that as those rates inch down, the dollar is likely to inch farther up.

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