US Dollar in 2008: a comeback for the greenback?

A low dollar is incredibly depressing for someone who, much like myself, enjoys traveling to Europe. In order to not fall into the black hole of a personal economic depression last summer when I was living in France, I actually stopped doing mental conversions and just accepted the prices in euros as they were. Example: “That shirt costs 25 euros? Great, that’s close enough to $25” (FYI: it’s not). The situation would have been even worse if the shirt’s price tag was in British pounds. Needless to say, by the end of the summer when I checked my bank account, I got a nice little shock.

Don’t think that all Europeans have been jumping for joy with the low exchange rate. Despite the fact that weekend trips to the good ole US of A now have a nice price tag, tourism is a two way street and Americans visiting the old continent have taken a decrease. The BBC reported today that in December 2007 tourism in London had fallen by 4.1%, which was accredited to the low dollar rate.

Some economists however are currently speculating that the dollar might make a year end comeback towards the latter part of 2008. Jeremy Stretch, the senior currency strategist at Rabobank, gave Americans and the global economy some sense of reassurance when he stated that the dollar could go as low as $1.50 to the euro, but that come the autumn months it could bounce back to $1.35. Add to that a high UK trade deficit and a weakening housing market and those tourists might soon come flocking back to London. As for Americans touring the rest of Europe, we will just have to wait and see.

I want to be excited at the prospect of the dollar regaining some strength, but even at $1.35, that 25 euro shirt is still…. well, I am not going to go there.