Why traveling abroad will be more expensive for Americans this summer
Americans looking forward to a trip abroad this summer will need to dig deeper into their pockets. The US dollar has just recorded its worst slide in value in 50 years against a raft of other currencies. It means that families traveling abroad will get less foreign currency per dollar than they would have done even as recently as last year.
The dollar's fall from grace is a result of Trump's erratic trade policies, concerns over spiraling government debt, and high interest rates. Many analysts are also predicting that the worst is yet to come for the world's reserve currency. However, the recent figures are not stopping Americans desperate for a vacation.
A quarter of Americans have plans to travel internationally in the next three months, according to recent survey data from Deloitte. Travel adviser Trish Smith told The Wall Street Journal that her clients were still planning to travel despite the weaker dollar. Smith said younger travelers are still keen to hit 'trending' spots including Bali and Japan this year.
This is because a strong dollar makes exports more expensive to foreign buyers, which hits profits from overseas sales. It has also given American investors a chance to invest in foreign stocks. Foreign stocks become more attractive to American investors because they mostly need to be bought in local currency.
A weaker currency gives American buyers a greater boost when converted back into dollars. International stock indexes have long underperformed the US, however they have had a successful start to the year. Major asset managers are also advising their clients to diversify away from just holding US stocks too.
'The fundamentals have been gradually deteriorating beneath the economy of the dollar,' J.P. Morgan Asset Management's chief global strategist, David Kelly, told The Wall Street Journal. 'If we get some shock, the potential for a big dollar decline or big market decline is there, and people should be diversified with international stocks to deal with that.' American companies with significant overseas presences are also expecting a boost from a weaker dollar.
S&P 500 companies gain more than 40 percent of their revenue from international sales and currency conversion losses have been a grip for years. 'Exporters should really benefit from this,' Lori Heinel, chief investment officer of asset manager State Street, told the Journal.
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