Post allowances plummet on dollar’s climb

[unhappycamper]

Post allowances plummet on dollar’s climb
By Matt Millham, Stars and Stripes
European edition, Tuesday, October 28, 2008

Post allowances given to American civilians on mainland Europe dropped as much as 30 percent Sunday, falling to their lowest point since March 2007 in response to the dollar’s recent meteoric rise against the euro.

Allowance rates in Germany were hardest hit. There, even the lowest-paid employee with no family will see a drop of more than $125 a month in most locations where U.S. troops are based.

Rates also fell in Italy, Spain, Portugal, Belgium and Luxembourg, but not as sharply, according to an update of allowances posted on the State Department Web site. Rates in the United Kingdom and the Netherlands didn’t change.

Post allowances typically fall as the dollar rises, but rarely so dramatically and in such a short period of time as they have in Germany. The dollar’s record rise against the 15-nation euro contributed most to the allowance drop in the country. New retail price survey data indicating that the gap in prices between Washington, D.C., and Germany has narrowed also contributed to the drop.

The allowance cuts aren’t necessarily bad news, and many overseas employees don’t see them as a bad thing.


Rest of article at: http://www.stripes.com/article.asp?section=104&article=58437

[enid602]

1. won´t last

The dollar´s climb is only temporary, as margin, leveraged and hedge fund investors now have a sudden need for dollars, as the assets they´ve invested in have lost value or have been called. Once the US economy has been substantially deleveraged (i.e., leveraged assets have been significantly liquidated), the dollar will take its rightful place alongside currencies of other countries with similar balances of trade, deficits, fiscal policy and interest rates.