24 January 2015

Moving on up

The U.S. dollar is worth nearly 90 centimes d'euro this morning. That's 90 eurocents or nine-tenths of a euro. Just a few years ago, the USD was worth as little as little as 65 eurocents for a while. Today's exchange rate represents an increase of 25 eurocents per dollar compared to the dollar's low point. In American terms, it's as if every time you change a dollar ($) into a euro (€) now, the bank throws in an extra quarter.


As a result, for every $1,000 a retired American living in France gets in retirement income from U.S. sources, she or he gets approximately 900 € instead of 650 €. That's 250 euros more. Say, hypothetically, that you have $3,000 a month in retirement income from U.S. sources. Now you have 750 € per month more than you had just a few years ago. You can afford to travel more, have more meals in restaurants, or buy a needed new refrigerator or washing machine.

When the euro replaced the French franc (FF) in early 2002, one dollar was worth not 90 eurocents, but about 1.14 €. The U.S. was still prospering as it did under Bill Clinton's administration, and the dollar hadn't yet suffered the George W. Bush downturn. By the time we bought our house in France in the spring of 2003, the dollar was down to 92 eurocents. The dollar declined steadily for years, and after going as low as 65 eurocents finally stabilized at between 70 and 75 eurocents in recent years.


If you have dollars, this would be a good time to pay for a vacation in the Eurozone countries (France, Italy, Spain, Belgium, Holland, or Ireland, for example). For us who live in France, the lower euro means that our airline tickets for travel to the U.S. are less expensive too. My annual trip is coming up, and I need to get a plane ticket soon. The airlines, including the American ones, require me to pay for the ticket in euros, because my principal residence in in France. If the ticket costs about 750 euros as it did last year, that will be more like $900 rather than $1000 or more.

The smart thing for Walt and me to do would be to put some of the dollar/euro windfall away, of course, and save it for a rainy day. Who knows how long the U.S. dollar will continue to fly so high? The reality, though, is that we need to buy a car, and we may soon need replacements for our old refrigerator and the washing machine. I've been waiting for the dollar to strengthen before buying a car, hoping the old Peugeot wouldn't give up the ghost in the meantime. Maybe the moment has come.

P.S. If you are used to thinking of the value of the euro in terms of the U.S. dollar — as most of us do, I guess — let me say that the euro's high point against the U.S. dollar was very close to $1.60. Over the past two or three years, it has stayed between $1.30 to $1.35. Now it's down to $1.12.

19 comments:

Tim said...

Ken, it is similar for us...
at the beginning of 2009...
just as we were beginning the move over...
the £ vs € was almost equal...
so close equal, I still think of the Euro as a £Sterling...
1£ being then worth 1.03€......
having been at 1.49€ when we purchased in 2003.
It had reached 1.09€ when we finally did the permanant move in 2010!

This morning, and thank you ECB...
it is at a healthy 1.34€ to the £1...
which, as we need to transfer money for the roofing that is being done...
means, as you've pointed out, a big bonus!

Ellen said...

Big bonus for you guys. We live in Euros, so it makes going to the States more expensive. Anyway, get yourself a newer car. You'll save on gas, certainly. We have bought second-hand almost new cars for years and have kept them an average of 10 years. Our Prius is a 2007 model that we got in 2008.

Ken Broadhurst said...

Living on a foreign currency, no matter what country you are from, is a dicey proposition. I knew that when we moved here almost 12 years ago. The exchange rate is something le commun des mortels has no control over. We don't plan to buy a new car. With the little bit of driving we do, there's no point. But living where we do and depending on a 15-year-old car, even though it is running fine right now, is also dicey. I know what car I want; now is probably a good time to get serious about finding one.

Ken Broadhurst said...

Another sign that the UK is closer in many ways to the US than to Europe, financially at least. Good for you for the roofing job.

chm said...

Congratulations to Callie for her ruling in the ME Alabama case. I'm sure Evelyn and Lewis rejoice for the state they live in to finally enter the 21th century! LOL

Travel said...

We were in Italy in early 2000 and the dollar and Euro were near equal in value. I am planing a couple of weeks trip to Germany for next summer and I am starting to pre-pay hotels.

Ken Broadhurst said...

Mystère et boule de gomme, CHM.

chm said...

https://www.scribd.com/doc/253551999/1-14-cv-00208-53-Alabama-Opinion-and-Order

If you don't want to read the ten-page ruling, scroll all the way down to the end.

Ken Broadhurst said...

Here is a Huffington Post article on this decision.

Ken Broadhurst said...

The euro became the official currency in France, Germany, and other European countries in January 2002. At that point, international confidence in the new European currency was low. Already, the dollar was riding high against the French and other EU national currencies. That situation lasted until the end of 2002. Then the U.S. dollar started declining.

Seine Judeet (Judith) said...

I've been paying attention to this news, and thinking of you two, especially. It feels like that high exchange rate has been dragging on for such a long time. I hope you can benefit well from this! Those are big savings!

Evelyn said...

It's nice that you think Alabama is becoming modern, Ken and CHM. Never fear we will lag on. The supreme court will set us all free in the days to come.
I love looking at all the coinage today. Glad to hear that our money is worth something, it's taken us a while. I'm glad you plane ticket home will be cheaper this year, Ken.

Diogenes said...

The US Federal reserve is ending quantitative easing and will likely raise interest rates later in 2015. This move will strengthen the US dollar against other currencies. The ECB is increasing quantitative easing at present, to stimutale the EU economy, which will weaken the Euro further.

Economists are predicting that the euro and dollar will be at parity by 2016: http://www.cnbc.com/id/102364696



Tim said...

It is strange to think that you can 'make' more by transfering money....
than you can actually make by leaving it in an interest account....
or lack-of-interest account...
HSBC Premier are currently paying one whole half of a percent!!

Gosia k said...

so it is a great news possibility of more travelling

Emm said...

I've been watching exchange rates, too. Hoping this year, finally, to get there for at least a week of language intensive. It feels as if I've forgotten every little bit of French I ever knew!

chm said...

At my age, I was hoping parity would come sooner than later.

Ken Broadhurst said...

With the way the euro has been nosediving, I wouldn't be surprised to see it at parity with the dollar in 2015. After years of biting our fingernails worrying about the dollar really crashing, maybe we'll be able to relax a little now, at least for a while. Whatever possessed me to retire (or throw in the towel, really) at age 54? Luckily, it has all worked out pretty well.

Betty Carlson said...

That is certainly great news as far as plane tickets go, especially when one has to fly clear to the West Coast!