The foreign exchange market is the world's largest, with over $4 trillion in transactions every day. The vast majority of these are done by businesses including corporations, mutual funds, pension funds, hedge funds, banks and insurance companies. Every year, individual Americans buy hundreds of millions of dollars' worth of foreign currencies for overseas travel and remittances.
The U.S. dollar has strengthened substantially over the past year against most major currencies. This makes foreign travel cheaper and more attractive, while stretching the value of money sent overseas. There are many reasons for the dollar's strength, but the principal ones include relatively strong growth in the United States compared with the rest of the world, combined with efforts by foreign governments to weaken their currencies in order to boost exports. Most forecasters expect these trends to continue through 2016.
Mexican Pesos
The peso has weakened by more than 22% against the dollar over the past 12 months, reaching a high of 17.3 pesos per dollar on August 24. The currency is the eighth-most actively traded in the world, driven by Mexico's status as a major non-OPEC oil producer and proximity to the U.S. Americans made an estimated 21 million trips to Mexico in 2015. These numbers are driven by heavy traffic in the border states as well as visits to beach resorts and Mayan ruins. Tourist traffic to Acapulco and Sinaloa has declined with rising concerns about drug and gang-related violence, but many other areas continue to thrive, including Cancún and Puerto Vallarta.
Mexicans living in the U.S. sent $16.6 billion in remittances to family members in the first eight months of 2015. This was up 6% from the same period in 2014; the full-year total was just under $22 billion. It's the country's second-largest source of foreign currency, after oil.
Canadian Dollars
The Canadian dollar weakened by almost 15% over the past year, due in large part to weakness in the price of oil, a key Canadian export. Travelers will now get more than 1.3 Canadian dollars for one U.S. dollar, compared with 1.12 a year ago and 0.95 in July 2011. Americans made almost 12.5 million trips north of the border in 2015, driven by the country's natural beauty and reputation for both safety and friendliness.
Euros
France, Italy, Germany and Spain are top travel destinations for Americans. They are among the 19 members of the European Union that use the euro as their official currency. The currency has weakened by 16% over the past year, as economic strength in Germany has been offset by continuing problems in a number of the southern European countries, especially Greece. Americans have long been drawn to European history, art and culture; the exchange rate movement has helped to boost tourism that had been pressured in recent years by high prices.
British Pounds
The pound has only declined by about 3% against the dollar over the past year, reflecting a relatively strong economy and stable interest rates. The roughly 2.5 million Americans who visit Great Britain include those who tour Scotland, Wales and Northern Ireland; they are drawn by historical significance as well as cultural ties between the two countries. London remains the top location for Americans to visit; Scottish castles are also a major draw.
Japanese Yen
The yen has declined by only about 3% against the dollar over the past year, but it's down nearly 43% over five years. The reduction in cost for Americans traveling to Japan is a major help to tourism, as is declining fear over the effects of the 2011 radiation leak in Fukushima following the earthquake and tsunami. Americans are drawn by the history, cultural, cuisine and natural beauty of Japan. It's considered to be one of the safest countries in the world in terms of crime, but the island country remains vulnerable to natural disasters.
