Euro's bid for parity against U.S. dollar hits tourists hard

FRANKFURT, Germany -- As the euro rises against the U.S. dollar, Thomas Metcalf's Berlin hotel room has gotten more expensive by the day.

It's a feeling Americans abroad are getting used to. After several years of a strong dollar, suddenly a trip up the Eiffel Tower or through Berlin's refurbished Reichstag have become more expensive pleasures as the euro climbs toward parity -- one euro for each dollar. On Monday, the euro briefly surged above 98 U.S. cents, its highest since February 2000.

Metcalf, a history professor from the University of California at Berkeley, booked his trip and a five-star Berlin hotel in February -- before the European currency started a run that has seen it gain some 11 percent in value since April.

"It makes it easier to make a conversion with the euro and dollar being equivalent, but I might have booked a less expensive hotel if I had known," Metcalf said as he waited in line to visit the glass dome at the Reichstag, Germany's parliament near the former site of the Berlin Wall.

"We're glad we came, of course," he added. "I wouldn't have stayed home just to save a hotel bill."

Anxious exporters

Poorer travelers are just one consequence of the dollar's fall. The flip side is a better deal for U.S. companies facing European competition. They've been squeezed hard by the strong dollar that tends to make their products more expensive abroad.

The dollar's dip can't come soon enough for Tony Raimondo, head of a company that has struggled to sell silos and grain storage containers in Europe against Italian and French competitors that have benefitted in the past from the weak euro.

His Behlen Manufacturing Co. in Columbus, Neb., has laid off 300 of 1,600 workers. And the profit margin on a $2 million order he won from a Turkish port in January was "just pennies." At that point, the euro was worth about 90 cents. "That dollar was a tremendous burden," Raimondo complained. He'd like to see it fall further -- below one to the euro.

For Europeans who watched the euro turn sickly soon after its 1999 debut, its comeback holds a lot of satisfaction.

When the euro was launched, the booming U.S. stock market and economy made dollar investments irresistible to foreigners.

That helped drive down the euro's value from $1.18 shortly after its launch to a low of 82.3 cents in October 2000 -- an embarrassment for a currency that European policy-makers hoped would challenge the dollar and show off the continent's economic power.

That's why the talk about parity is potent.

"Money is about symbols," Deutsche Bank chief economist Norbert Walter said. "Particularly after the negative talk about the euro for so many years, and its implications for the sentiment of international investors."

For European consumers, the weaker euro will help keep inflation under control, as prices fall for imported goods and raw materials -- particularly oil, which is priced in dollars.

The European Central Bank, which makes monetary policy for the 12 nations using the euro, can use the boost.

"It looks good for somebody who is trying very hard to reach credibility and has had a difficult time," Walter said. "So the ECB certainly is quite happy that its young child is being accepted."