The Fed may soon cut interest rates. That could make your next trip abroad more expensive.
The U.S. Federal Reserve may start cutting interest rates before year’s end.
The U.S. Federal Reserve may start cutting interest rates before year’s end. That could make future trips abroad more expensive for the nation’s travelers.
That’s due to how interest-rate policy affects the strength of the U.S. dollar.
Here’s the basic idea: An environment of rising U.S. interest rates relative to those in other nations is generally “dollar positive,” said Jonathan Petersen, senior markets economist and foreign exchange specialist at Capital Economics.
In other words, rising rates underpin a stronger U.S. dollar versus foreign currencies. Americans can buy more stuff with their money overseas.
The opposite dynamic — falling interest rates — tends to be “dollar negative,” Petersen said. A weaker dollar means Americans can buy less abroad.
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