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Marketwatch: Dollar Rallying

October 23, 2008 By: Travel Agent Central Contributor

The dollar nearly reached a two-year high against the euro Wednesday, an improvement that agents with clients traveling to Europe should note as it may affect the prices of upcoming tours. The euro now costs $1.2832, which is down from $1.3062, and is trading the lowest since January 2007, CNN reports. The dollar's rally can be attributed to the U.S. remaining perceived as a safer market in which to invest as the government's bailout supports a faster rebound when compared to other countries.

The rebound took place shortly after British Prime Minister Gordon Brown reiterated the notion made by Bank of England Governor Mervyn King that the UK and other European countries are close to entering a recession.

"The real core issue here is that U.S. rates are low, but I think UK rates and euro rates can fall," Tom Benfer, director of foreign exchange at BMO Capital Markets, told CNN. "From last year [the U.S.] has already been on an aggressive rate cutting campaign," said Benfer. The Federal Reserve's key interest rate is at 1.5%, compared with the European Central Bank at 3.75% and the Bank of England at 4.5%.

Financial experts are forecasting that, in addition to the Bank of England, several European banks may cut interest rates soon.

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