Thursday, November 20, 2008

The Rate of Exchange

Thanks to I can monitor the ebbs and flows of the, sometimes fragile, Euro/USD relationship. Since mid to early October, the dollar has been strengthening against the Euro (or the Euro weakening against the dollar). This would normally have been a welcome suprise, up until September I was getting paid in USD. However, just as Europe became a realistic travel destination for Americans once again, I traveled to the US and returned to work in the Euro zone where my salary is now paid in Euros. One year ago, shopping in the US meant an automatic discount of about 40% on everything because fo the exchange rate. As Christmas approaches this year, the Euro is only worth about 1.25 (good for buying Euros with USD). In fact, I've been in the market fora flight to Boston. In the past it has ALWAYS been cheaper to purchase flights, and everything else, in dollars. Now, I can actually save between $20 and $60 by buying the exact same flight on the US website in dollars. This example got me thinking about what else may be cheaper in Euros at this point and I did a little searching. As one may imagine, typicalls American products like Dell and iPods are still cheaper in dollars, only marginally based on the actual number being the same. Products imported to both countries, such as UGGS are still significantly more expensive in Germany but this is probably due in part to greater taxes on clothes and in the case of UGGS, they have only recently been introduced to the German market and are not competing with copy-cat boots. European makers, such as Longchamp (France) are actually cheaper in Germany now. When I bought my large Longchamp tote in Miami in 2007, accounting for the exchange rate of roughly 1.50, the price was almost the same on both continents and it ended up being cheapest to buy at the airport tax free. Now you will pay 79 EUR in Germany and $125 (before tax) at Nordstroms, realizing a discount of about $25 or 20% buying in EUR. Some things, such as flowers and frozen pizza, have always been and continue to be cheaper in Germany while shoes and electronics will cost you less stateside. The exchange rate can only account for so much as taxes are 19% on everything you purchase in Germany so shopping in NH will help increase the value of your dollar. For the first time, I find myself contemplating purchasing a flight in EUR and hoping if I wait a little longer the EUR may fall just a bit more and, with a bit of luck, rise in the months leading up to my trip.

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