Financial Vocabulary

SCOTT SIMON, HOST: Some good news if you’re planning a trip to Europe or even thinking about it – it’s more affordable. For the first time in two decades, the value of the dollar is just about equal to the value of the euro. NPR’s David Gura reports.

DAVID GURA, BYLINE: Teresa Valerio Parrot and her husband are celebrating their 25th wedding anniversary this year. And she says they thought about taking a trip from their home in Colorado to California or Hawaii.

TERESA VALERIO PARROT: We quickly realized it was going to be about the same price to go to Paris than it was to stay within the United States.

GURA: Flights are expensive everywhere, but thanks to the strength of the dollar relative to the euro, she’d pay less for a hotel and meals. So in September, they’re headed to France.

VALERIO PARROT: We plan to go, have some great wine, hopefully sip some bubbles and bring back a whole bunch of souvenirs.

GURA: The last time they were there in 2013, to get one euro, they had to pay about $1.30. Kathryn Dominguez is an economics professor at the University of Michigan, and she says the two currencies are at parity ’cause of how investors feel about the economy in the U.S. compared to Europe.

KATHRYN DOMINGUEZ: Market participants are expecting that the U.S. economy is going to be stronger than the eurozone countries over the next – you know, foreseeable future.

GURA: Which may sound surprising, given the U.S. is also dealing with economic uncertainty, high inflation and fears of a recession. But the dollar is unique among currencies, according to Jane Foley. She’s the head of foreign exchange strategy at Rabobank.

JANE FOLEY: Generally, a currency will react to the fundamentals of the country to which it belongs. That isn’t necessarily the case with the U.S. dollar.

GURA: It’s the world’s dominant reserve currency. It’s also to the dollar’s advantage that interest rates are going up quicker in the U.S. than in Europe. Investments denominated in dollars are seen as more attractive because returns are higher.

FOLEY: That’s textbook economics. Higher interest rates generally leads to a stronger currency.

GURA: But this isn’t just about dollar strength. It’s also about euro weakness caused by higher prices and fallout from the war in Ukraine. Europeans are trying to figure out how to live with less oil and natural gas from Russia. In the U.S., Teresa Valerio Parrot is making plans for museum visits, long walks and some early Christmas shopping.

VALERIO PARROT: We’re hoping that the dollar continues to hold strong so that all of our family and friends get a little bit better Christmas present than we otherwise could afford in Europe.

GURA: David Gura, NPR News, New York.