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US dollar, Eurozone economy a mixed bag for expats

Although I have a French bank account, I know as an American expat that going to the ATM (cash machine) to withdraw from my American account is a matter of strategic timing. I’m always keeping my eye on the markets and the exchange rate for US dollars to Euros so that I can get the biggest bang for my buck, even though it is at miserable levels. At the time of this posting, it is 1.492 USD = 1 Euro ($1 = 0.67 centimes).

US dollar - Euro rate

As the Euro rises against the dollar, more and more American expats are feeling the squeeze when withdrawing from US accounts.

The US dollar looks to remain at low levels for quite some time, judging from the recent decision of the US Federal Reserve to keep interest rates low for the time being (thus technically making it easier to borrow and consequently spend money, undermining the value of the dollar by way of supply and demand of liquidity).

Also playing a role: the inflation-weary European Central Bank announcing hints of an “exit strategy” from stimulus. The ECB has been quite cautious in the past about lowering interest rates, so that contributes to a stronger Euro overall. But they too have voiced concern about a weaker US dollar. Indeed, Airbus (EADS) has suffered because its production costs are in Euros but it sells its airplanes in dollars. There is even an idea of moving some production to US dollar economies.

Meanwhile, with US economic growth in the last quarter at 3.5% largely driven by the stimulus program (like “cash for clunkers” and helping negotiate lower mortgage rates for home owners), the US government is happy with a low-value dollar that is driving export growth. This is good for the US economy but bad for expats like me when withdrawing US dollars into Euros. I also know that generally when the US stock markets are up, the dollar usually gets a bit weaker. So when the US markets are up, it is bittersweet as an expat.

How are you fellow expats dealing with this issue?

According to recent reports listed below, the Eurozone economy may be officially coming out of a recession, but there remains pessimism about unemployment and sustainable growth in the mid-term. Much is similar in the US.

In fact the whole concept of GDP has been put into question by Nobel Laureate Joseph Stiglitz in France, as well as by BusinessWeek magazine. But this is an issue for another discussion.

HiFX –Europe’s job market indicates caution for money transfers

HiFX –Eurozone recession figures may bring optimism to expats making money transfers

  1. November 16th, 2009 at 17:47 | #1

    Weaker dollar hits Airbus owner: http://news.bbc.co.uk/2/hi/business/8361799.stm

    European aerospace giant EADS, the owner of Airbus, lost 87m euros ($130m; £78m) in the third quarter of 2009 as the weak US dollar hit its results.

    The loss compared with a 679m euro profit it made in the July-September quarter a year ago.

    EADS has also seen orders for its aircraft fall in the economic downturn.

    Most of the firm’s costs are paid in euros but most of its aircraft are paid for in dollars, so a weak dollar against the euro eats into its profits.

    “The long-term dollar level is an important driver for EADS’ earnings power over the coming years,” the company said.

    Reviews underway

    The firm also warned that its fourth quarter earnings could be hurt by charges relating to its delayed A400M and A380 programmes.

    Earlier this month, South Africa cancelled a multi-billion dollar contract for eight A400M military aircraft, citing escalating costs and delivery delays.

    The A400M had been due to fly for the first time in March this year, but has suffered technical problems.

    “New programmes require our utmost attention,” said Louis Gallois, EADS chief executive.

    “Regarding A400M, we are working with our customers to reach an acceptable solution for all parties and to put this programme on a solid long-term footing. Additionally, the A380 programme is still a matter of concern; industrial and financial reviews are underway.”

    But EADS maintained its estimate of up to 300 gross aircraft orders in 2009 and said it expected to deliver about 490 aircraft this year.

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