It hurts, oh boy, does it hurt. I’m currently living in the heart of the euro zone on withdrawn U.S. funds, meaning I feel each fall of the dollar acutely. The expert prognosis isn’t looking good either. Maybe you’ve been chocking those U.S. price increases up to higher fuel costs, but the truth of the matter is all trade has gotten more expensive because our economy is weak and our deficit high. Just another reason to consider carefully who you vote for in 2008.
That doesn’t mean that you need to suffer as I do when you head off on your next vacation. I share three simple ways to mitigate the weakening of the dollar after the jump.
The easiest strategy is simple avoidance: travel to countries where the dollar ISN’T weak in relation to the local currency. Go Budget Travel does a good job of laying out the areas of the globe where your dollar will still buy you what it did just a few months ago. Long story short: stay in the U.S. (duh) or hit Central America, Southeast Asia and the Middle East, where currencies are tied to the dollar.
Next easiest strategy is to book early (like now!) and pay in dollars. This is easier for the package tourist than for the no-budget traveler, but there are certain things that even the cheapo can book early, like low-budget flights, summer rail passes or hostel rooms. By locking in your prices now, you will “save” the expected fall of at least 8 cents on every dollar you plan to spend.
Similarly, with currency exchanges expected to get worse, you might consider converting your currency now. Withdraw cash from the bank or buy travelers’ cheques, whichever you prefer. Here you’ll want to weigh the future costs of exchange fees and the risk of traveling with cash with the uncertainty of the currency market.
Update 11/19/07: I meant to include this useful link as well.