It’s like a teeter totter.

As Americans spend more money on imports than U.S. industries make from exports to foreign countries, foreign industries are perched at the top of the plank with their legs swinging free. This causes a trade deficit. American dollars are circulating in abundance around the world and thus, the value of the bills decreases.

Now, American exports are more affordable and imports are more expensive. Foreigners have dollars to spend and the going rate is good. U.S. exports boom and the weight of the American revenue sends the teeter totter back toward the ground and equalizes the plank.

As explained by Michael Walden, professor of economics, a lower valued U.S. dollar can be a balance to our import expenses and export revenues.

The U.S. dollar hit an all time low in November as the euro reached $1.4968, meaning the euro was worth almost 150 percent of the dollar, according to a Wall Street Journal article. Last week, the average euro value was $1.4718, according to the Federal Reserve Bank of New York data. Yesterday, the euro was valued just below its all time high at $1.4877.

And the up-and-down nature of the U.S. dollar has a major effect on those planning on studying abroad.

The dollar floats

Just as it creates the teeter-totter effect among U.S. and foreign industries, the value of the U.S. dollar itself fluctuates constantly. And it has done so for more than three decades, according to Thomas Grennes, professor of economics.

Before 1974, Grennes said the government set the value of the dollar by the amount of gold contained in the Federal Reserve — called the “Gold Standard.” Now, the government can use its discretion to control the dollar and other financial markets rather than relying on this standard.

But Grennes said the government rarely plays a role in setting the value.

“Since 1974 the dollar has been floating,” he said.

Seeing the future

And with a floating dollar, it is nearly impossible to predict its rises and falls.

The best way to attempt to do so, according to Grennes, is through something called a Futures Market.

This is how it works: a person can purchase a contract at a bank in New York, promising to purchase euros at a specific date in the future, Grennes said. The person would then lock in the price. When the date arrives, they will have to pay for the euros at the price they specified.

Planning trips without dollar definites

The constant uncertainty of the future U.S. dollar value is an ever-present challenge when planning Study Abroad trips, according to Emily Burnett, an advisor for students studying in Europe and Australia.

This uncertainty especially comes into play when planning summer trips abroad, which are organized a year in advance by trips’ faculty leaders, Burnett said.

She said it’s hard to set prices for the trips, as the budgets often need adjustments as exchange rates change.

Burnett, a graduate student in international studies and economics who has done research on the topic of study abroad costs, said she has used the Futures Market in the past to help determine what costs will be for the trips. The market, she said, was anywhere from two to ten cents off. While these may seem like insignificant differences, it makes a difference to a large budget.

“If a program budget is $30,000 and [the market] is 10 cents per euro off, that makes a big difference,” she said.

She said the market did an accurate job of predicting whether the values would go up or down, even if it did not predict the actual values.

The dollar still weighs more — in some places

While a low-valued dollar hurts Americans traveling in euro-using countries, as well as in the United Kingdom, where the pound is also worth more than the American dollar, that dollar is still worth more than some currencies.

For example, Burnett said, it is still relatively inexpensive for Americans to travel in the Czech Republic, so Study Abroad programs in Prague are not affected. But, when the country joins the European Monetary Union, that will change, she said.

Also, Burnett said, programs in South and Central America may become more attractive to students who are worried about cost.

Keeping costs down

The Study Abroad office is working to keep costs down, Burnett said, using a few different tactics.

For the summer programs, cutting one or two planned excursions is a way to reduce costs.

And, by asking to be billed for things like housing abroad early, the office can ensure that costs won’t increase later if the dollar value drops.

Burnett suggested students do the same when planning for semester-long programs. If a student is participating in a direct exchange program, they pay N.C. State tuition, but they must pay the room and board costs abroad – and that’s where expenses can build up.

Students can request to be billed in American dollars, as well as pay as early as possible. This could backfire, however, if the value of the dollar were to go up.

Another way to reduce costs, Burnett said, would be to employ a tactic used often by companies involved in international trade.

“If it looks like the euro is going up and the dollar is going down in the future, students could buy euros now and save them,” she said.

However, while she said it is worth looking into, Burnett said she was not sure if this approach would be practical on a small scale.

The type of program one chooses, though, has a definite impact on costs. Burnett said students enrolled in International Student Exchange Programs pay both N.C. State tuition and N.C. State housing and food costs. Airfare and any extras such as clothes purchased abroad are the only extraneous costs.

Is the decreasing dollar value all bad?

Despite the fact that gas prices are skyrocketing and Americans traveling abroad will face increasing costs, the weakening dollar is beneficial to some, according to Grennes.

“It’s very misleading — some people have written that when the dollar goes down, Americans lose prestige,” he said.

Grennes said this is not the case, especially for American industries that export to foreign countries.

An example of one such industry, according to Walden, is SAS, a software company based in Cary. The company, which does a lot of work in foreign countries, is able to sell more when the dollar value is lower.

Another group that benefits from the exchange rate is international students studying in America.

Both Burnett and Grennes said they’ve interacted with international students who have been pleased and surprised by how far they are able to stretch their money in the U.S.

How can American dollars grow stronger?

According to Walden, the answer is to take dollars out of circulation. The fewer dollars there are in the hands of spenders, the higher the value of the American dollar.

Walden said if the American government wanted to take dollars out of circulation, central banks would sell investments to take them off the market. The dollars would be kept in the banks’ vaults to bolster their value.