Exchange rate woes, or why imported wine keeps getting more expensive

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I wrote about this in November, when the dollar was at record and near record lows against the Australian dollar, the euro and several other key foreign wine currencies. And things have only gotten worse since.

It is at its lowest level since 1971 (the young people should Google Richard Nixon), and one financial publication called it a “doomsday” scenario.

The weaker the dollar, the more expensive foreign wine becomes. It takes more dollars to purchase the same amount of foreign currency to buy goods and services. The dollar has fallen another seven percent against the euro, almost 3 1/2 percent more against the Australian dollar, five percent more against the New Zealand dollar, and an astounding 14 percent against the Chilean peso.

In November, the weak dollar was pushing up the price of $10 and less foreign wine, especially from France and Australia. Wines that had been $8-$12, like Chateau Bonnet red and white from Bordeaux, cost $12-$14. However, inexpensive wines with big volumes like Yellow Tail, and wines that cost $15 and up, were holding fast despite the dollar’s slump.

That will almost certainly change, given the dollar’s nearly unprecedented collapse. It’s entirely possible that all those $7 bottles of Yellow Tail could soon cost $10. And I have already seen $15 New Zealand sauvignon blancs moving up to $18 and $20. There might still be some room for foreign producers who charge $20 and more to hold the line, but for how long?

The other downside? California producers, faced with rising fuel costs, can raise their prices without losing market share. So they are. It’s becoming increasingly difficult to find California cabernet, for example, for less than $15.

Will the dollar recover soon? Don’t count on it, says one expert. ““It’s hard to stimulate an economy when the currency is going down the tubes,” he said.

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