What the falling dollar means for you

...Thinking about a trip to Europe? Start saving. Because of the weakening U.S. dollar, travel overseas is becoming more expensive.

Even if you don't plan a globe-trotting vacation, the falling dollar may cost you. If the slump gets out of control, it could mean inflation and much higher interest rates for Americans.

The dollar has steadily lost value compared with other major currencies since the end of 2002. Result: The euro has risen more than 70% against the dollar. The Canadian dollar, affectionately known as the loonie, is up more than 60% -- to parity for the first time in more than 30 years. The yen is up about 16%.

The dollar is falling partly because Americans import way more goods than they sell abroad -- especially oil -- and must borrow to close the gap. Another factor: Higher interest rates in Europe and elsewhere make those countries' currencies more valuable.

Consider how this affects your life:
The downsides
Pain at the gas pump will get worse. While growing global oil demand is pushing prices higher, here's the dollar angle: Crude oil is priced in dollars, and oil producers, especially members of the Organization of Petroleum Exporting Countries, want to be compensated for the dollar's decline.

In most years, the price of crude oil and gasoline declines in the fall. But this year, AAA's daily price survey shows regular unleaded gasoline at about $2.79 a gallon nationally, up 21% from a year ago.

* Jim Jubak: Big banks about to lower the boom

You may need to stay home. Let's say you went to Paris in early 2002 and paid 100 euros a night for a room in a moderately priced hotel. That was the equivalent of about $86 a night.

Today, that room would cost $142 a night, a 65% increase.

Ditto for neighboring Canada. Keep that in mind if you want to attend the 2010 Winter Olympics in Vancouver.

Your dream BMW costs more. The base price of a BMW 3 Series sport sedan has risen about 20% over the past five years, The Wall Street Journal reported this week. It's likely to go up more.....

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