Euro hits three-month high against dollar - how will this affect Americans in France?

The euro briefly climbed to its highest level against the US dollar in three months this week, highlighting the potential impact of a weaker dollar on Americans living and working in France.

The euro reached $1.171 on August 20, its highest level since May 14, before easing back slightly. The dollar subsequently recovered some of its losses, with the euro trading at around $1.1676 later in the day, according to Reuters.

Why did the dollar fall?

The latest drop in the value in the dollar was triggered by an announcement this week by the US Treasury, which said on August 19 that it would increase the size of its buybacks of longer-term government bonds from $2 billion to at least $4 billion per operation.

The measures, covering bonds with maturities of 10 to 30 years, are intended to provide more liquidity to the long-term bond market and will begin in September.

However, the announcement initially weakened the dollar, with traders concerned that the US government's growing debt and budget deficit could put further pressure on the currency. 

The dollar later recovered some of its losses as US Treasury yields rose again and traders questioned whether the buyback programme would be enough to calm the bond market.

What does a weaker dollar mean for Americans in France?

For Americans living in France and paid in US dollars, a weaker dollar means their income buys fewer euros. 

For example, at $1.10 to the euro, a $5,000 payment would be worth around €4,545. At $1.17, it would be worth around €4,274 before fees.

This can affect people receiving a US salary, pension or other income while paying their everyday expenses in euros. 

The impact can be even greater for those making regular transfers, or planning larger payments such as a property purchase or moving savings to France.

How can Americans in France manage exchange-rate risk?

For Americans receiving income from the US and spending in euros, using a currency transfer specialist may be one way to manage regular or larger transfers.

Currency specialists can offer competitive exchange rates and tools that can help manage exposure to exchange-rate movements. 

Forward contracts

Another option is to use a forward contract, a financial tool that allows you to agree an exchange rate in advance for a payment you plan to make in the future.

This can provide more certainty for someone who knows they will need to convert a large amount of dollars into euros, for example to help fund a property purchase. However, if the dollar subsequently strengthens, you would not benefit from the better rate.

Scheduled transfers

Rather than converting a large amount of money at once, it may also be possible to transfer funds in stages.

This can help spread the timing of currency conversions and manage cash flow, although it does not guarantee a better exchange rate.

Currency wallets

Some currency specialists offer wallets that allow customers to hold money in different currencies and decide when to convert it.

This can give you more flexibility over when you exchange dollars for euros, particularly if you know you will need the money at a later date.