Dollar has begun to rebound

LONDON — For months, cost-conscious Americans have been avoiding Europe, scared off by a plunging U.S. dollar that has made everything from Cokes to cabs more expensive.

Recently, the almighty greenback has been making a comeback.

A stronger dollar means Americans will pay less for imported items, from clothes to cars, and less for hotel rooms and meals in London, Paris, and Rome. But it also means U.S. exports are more expensive in the world marketplace.

On Tuesday, the euro slid to a six-month low against the dollar, falling to $1.4691, while the British pound was at $1.8592.

The euro is more than 8 percent below its all-time high of $1.60 on April 22, while the pound is almost 12 percent below its peak of more than $2.11 last November.

The currency of 320 million Europeans has been weakening with the realization that the European Central Bank isn't likely to continue raising interest rates amid fears of a European slowdown.

If the trend continues, it could bode well for both U.S. travelers and also U.S. college students.

Erin Ray, a spokeswoman for St. Edward's University in Austin, Texas, said that "as the new academic year gets under way next week, we will begin recruitment for spring 2009 programs, and we are certainly hopeful that the rising value of the dollar will encourage more students to participate in programs in Europe," she said.

Even so, the euro still has a long way to go before reaching the levels of five years ago, when a euro cost an American $1.08.

"The U.S. dollar had been in the gutter and now it's just barely climbed back onto the sidewalk," said Henry Harteveldt, a travel expert at Forrester Research in San Francisco. "It has a long way to go to make Americans feel they can 'afford' Europe."

Frances Burwell, vice president of the Atlantic Council of the United States in Washington, D.C., said she doesn't expect the rising dollar to make a big difference to tourism, at least not in the short-term.

"Oil prices have made airfares very expensive, so getting to Europe is still a big obstacle even if it is cheaper once one arrives," she said.

A stronger dollar can be bad news or good news for U.S. businesses.

Jim Sumner, president of the USA Poultry & Egg Export Council in Stone Mountain, Ga., said the weak dollar has made U.S. exports more competitive.

U.S. exports have shot up 22 percent over the past year. Exports of U.S. poultry meat set an all-time record in the first half of 2008 with their value reaching $1.99 billion — 33.7 percent more than in the same period in 2007.

"Now the dollar does seem to be strengthening, but I would think we have a lot of strengthening yet to come before this will negatively impact our position in the marketplace," he said.

For Atlanta-based Delta Airlines, a strengthening of the dollar helps when it comes to costs outside the United States.

"For example, a salary paid in euros or pounds ? if the dollar strengthens, it means Delta is not using so many dollars to pay employees," said spokeswoman Olivia Cullis.

Since oil is priced in dollars, a stronger currency reduces pressure on producers to keep their prices high, and that's also helpful for airlines.

By contrast, a stronger dollar is not necessarily good news for Atlanta-based Coca-Cola Co. Most of its products are manufactured and sold outside the United States through a network of about 300 bottling partners worldwide with exclusive rights.

When international sales are converted to the weaker U.S. dollar, the company has gained considerably — a trend now in danger of reversing.

Analysts say one reason for the dollar's comeback is that investors are finally coming around to the view that America might emerge from its economic doldrums earlier than Europe or Asia.

U.S. exports have been rising rapidly, outstripping even China's growth, while a spate of negative headlines has been pouring out of Europe.

Asking prices for homes in London — perhaps the most expensive market in the world — have fallen 5.3 percent over the past month, equivalent to a $42,000 drop, according to a survey by Rightmove, an online property research agency.

The euro zone's economy contracted by 0.2 percent during the second quarter, while Germany's economy — Europe's largest — shrank by 0.5 percent between April and June. Both France and Italy reported a drop in growth of 0.3 percent.

The British Chambers of Commerce warned Monday that Britain is likely to be hit by a recession within the next six to nine months.

Analysts say it's doubtful the Bank of England and the European Central Bank will be able to hike interest rates for a long while and may even have to cut them, making the pound and euro even less attractive.

Shelley Emling is a London correspondent for Cox Newspapers. Nin-Hai Tseng of the Cox Newspapers Washington Bureau contributed to this article.