Connect with us

News

The Euro and Dollar Are Equal for the First Time in 20 Years

Photo by Shutterstock Go ahead, get all the cheese. If it’s been a while since you’ve traveled to Europe, you could be in for a welcome exchange-rate surprise. Over the past year, the dollar-euro conversion rate has been steadily dropping. And on Tuesday, one euro was valued at the equivalent of one U.S. dollar, marking the first time the two currencies reached parity since December 2002. As of press time, the euro was trading at the exact value…

Published

on

Shutterstock provided the image for this post. You can eat all the cheese you want.

Exchange rates can be a pleasant surprise if you’ve not been to Europe for a while. The dollar-euro exchange rate has been steadily decreasing over the past year. And on Tuesday, one euro was worth one US dollar for the first time since December 2002, when the two currencies were at parity.

A fraction of a penny from parity, the euro was trading at $1.003 at the time of this writing, and currency markets will continue to react in real time to constantly changing economic factors. Dollars were hovering around $1.20 against the euro one year ago.

It should come as a relief to Americans traveling to Europe to see the dollar’s strength against the euro, which will help them combat skyrocketing airfares caused by rising oil prices and labor shortages, as well as inflation, which has an effect on the cost of just about everything, from food to services, on both sides of the Atlantic. Travelers from the United States might be less worried about the chaos and crowds at airports like Heathrow in London and Schiphol in Amsterdam.

Advertisement

It is made up of 19 countries in the European Union: Austria; Belgium; Cyprus; Estonia; Finland; France; Germany; Greece; Ireland; Italy; Luxembourg; Malta; the Netherlands; Portugal; Slovakia; Slovenia; and Spain. Croatia will become the 20th EU member to adopt the euro at the beginning of 2023 after EU finance ministers approved the plan on Tuesday.

Other currencies are also losing ground to the dollar, including the British pound, which fell to a value of $1.185 on Tuesday, the lowest value since March 2020, according to The Guardian. Following Boris Johnson’s resignation, a British newspaper cited “economic gloom” and “political uncertainty” as factors weighing down the pound.

U.S. visitors to Europe have grown accustomed to calculating an additional 20%, 30%, 40%, or even 50% to 60% above the rate in euros being charged for their hotel room, café au lait, croissant, glass of vino, or museum admissions over the past two decades. On our bank statements in the United States, of course, we see the dollar equivalent of the euros that we’ve spent there. This added expense can be a harsh wake-up call for many travelers after a long trip abroad.

Changes in the value of the dollar can have a significant impact on how much money you have left over at the end of a vacation. As an example, if you’re traveling outside of the country, your hotel room will likely be one of, if not the, most expensive parts of your budget. Hotel Paradiso, one of our favorite new properties in Paris, has rooms starting at 176 euros a night for guests. That would have cost $211 a night a year ago (at a currency exchange rate of $1.20 to one euro). That works out to about $176 per night in today’s dollars.

Advertisement

Also, the dollar’s upward trend may continue. Bloomberg reported on July 6 that traders are becoming increasingly confident that the euro will soon fall below parity with the dollar. Despite the complexity and volatility of the global economy, currency forecasting is difficult.

The Federal Reserve is raising interest rates more aggressively than other countries’ central banks in an effort to cool the hottest U.S. inflation in four decades, which is primarily driving up the dollar’s value.

As a High Frequency Economics analyst Rubeela Farooqi notes, “the US economy is on firmer footing compared to Europe despite the concerns about a potential recession in the US.”

For more information, visit the Associated Press website. Published originally in May 2022, this story has been up-to-date with the most recent information on July 12, 2022.

Advertisement

>> Next, we’ll show you how to get a good deal on a plane ticket this year.

Advertisement