The Once-Mighty Dollar Hits a Low-Water Mark : Currency: It plummets against its German counterpart. That’s bad news for tourists but good news for U.S. exporters.

The last time Anita Henderson was in Italy, nine years ago, she could buy a pizza in the little town of Spilimbergo for $1.50. This year, the same pizza cost her $6.50.

And it’s not just because the price of mozzarella has gone up. The once-mighty dollar has lost half its value since 1983.

“Nine years ago, the dollar was worth 2,000 Italian lira,” said Henderson, a research scientist at the University of Texas, touring a Brussels museum after two weeks in Italy. “This year I barely got 1,000.”

What is true in Italy is true all over Europe. The dollar, defying massive intervention by the U.S. Federal Reserve and 16 other national central banks in international markets, sank on Friday to its all-time low against Europe’s bedrock currency, the German mark. Because elaborate financial arrangements tie most other West European currencies to the mark, the dollar also hit or approached new lows all over the Continent.

And analysts on both sides of the Atlantic see little chance that the dollar will rebound before the end of the year, at best. “I suspect we are on the verge of a full-blown dollar crisis,” said Jim O’Neill, the chief of Swiss Bank’s London-based currency monitoring team.

That is bad news not only for tourists such as Henderson but also for Americans at home who enjoy French wine and for those working in Europe who are paid in dollars.

Conversely, it is good news for American exporters. Their goods, priced in dollars, seem cheap to those holding strong European currencies.

That is why American policy-makers are not terribly alarmed about the battered condition of their national currency. Analysts say the American government seems satisfied with the dollar about where it is.

The dollar peaked in Europe in 1985, after climbing relentlessly during the first half of the 1980s. Then, the dollar bought more than three German marks.

Then, just as steadily, the dollar slid back down. It reached an all-time low of 1.4430 marks in February, 1991, before regaining some ground. It began backsliding last spring and crashed to about 1.4345 German marks on Friday, nearly a pfennig below its former low of 1.4430 marks.

The dollar has also lost about half its mid-1980s value against the Japanese yen. It has not fallen in recent weeks against the yen, because Japanese interest rates are falling in response to an economic slowdown there.

The reasons for the dollar’s sorry state are not hard to find. Interest rates in Germany are about five percentage points higher than in the United States, after accounting for probable inflation, according to Swiss Bank Corp.

For international investors, that makes Germany a much more appealing place than the United States to put their money.

London’s National Westminster Bank estimates that the dollar would be worth about 25% more in Europe if its value were based simply on the amount of goods it could buy. One way to see that is to visit McDonald’s. The price of a Big Mac hamburger, $1.89 in Los Angeles, is about $3.50 in most European capitals. Some of the reasons have to do with Europe’s high agricultural costs and tax rates. But the undervalued dollar makes the gap that much worse.

Still, despite the high cost of traveling in Europe with a wallet full of dollars, Americans are flocking here this year, lured by cheap air fares.

Amy Feldman, a 25-year-old teacher at a Connecticut boarding school, came to Europe for $500 on an Air France charter. “But when you get here, you can’t afford to buy anything,” she said as she walked through Brussels’ historic district.

Compared to 1991, when the Persian Gulf War and the recession combined to keep Americans at home, European tourism is booming.

The New York-based European Travel Commission expects nearly 4 million Americans to travel to Europe this summer, up from 3.6 million last summer but still short of the record 4.2 million of 1990.

The weak dollar, bad news for Americans who travel in Europe, is good news for those who sell here.

Even though Great Britain remains mired in recession, and many of Europe’s other major economies are slowing down, American exports to West Europe remain near record levels. Exports totaled $60.8 billion in the first six months of this year, down slightly from the $61.6 billion in the same period of 1991.

The dollar is unlikely to rise soon, said Swiss Bank’s O’Neill. U.S. interest rates are, if anything, heading even lower as the Fed seeks to breathe new life into the listless economy.

Meanwhile, the German central bank, alarmed that reunification could fuel inflation, is determined to keep rates high. Any further divergence of interest rates in the two countries, O’Neill said, would only put further downward pressure on the dollar.

To prop up the dollar, the Federal Reserve and most European central banks have bought massive amounts of greenbacks four times since late July, most recently on Friday, in the international currency markets. Their intervention has done little more than to slow the dollar’s slide.

The Dollar in Decline Big Mac Index

The dollar’s decline has made it more expensive for Americans traveling in Europe. Wanna buy a hamburger in Paris?

Cost of a McDonald’s Big Mac, expressed in dollars, as of Wednesday:

Los Angeles: $1.89

Berlin: 3.22

Brussels: 3.63

London: 3.45

Paris: 3.54

Rome: 3.79

Source: McDonald’s

Passing the Buck

The dollar this year has dropped sharply against the German mark and in recent months has also lost ground against the Japanese yen. The U.S. dollar’s end-of-month values, except latest:

Source: Swiss Bank Corp.