Destinations Magazine

Should You Be Paying More Attention to Currency When Travelling?

By Twothirstytravellers @2thirstytrav

By Patrick Foot, writer at IG

People tend to decide on a travel destination based on many different reasons: from a lifelong wish to visit a particular country to a cheap last minute flight that offers low cost relaxation in an unknown environment.

When considering the cost of a trip, however, it’s always worth taking a look at the currency markets. The current strength of the pound means British tourists can get more for their money in a host of enticing destinations.

As economic news and market forces play out throughout the year, the relative value of all currencies shifts. What that means for travellers is the ability to pick up some currency at low prices before you trip.

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Trips to Brazil or Australia, for instance, could work out much cheaper this summer. Brazil had a tough 2013, with economic woe and protests against its politicians rife. The World Cup, though, has brought it back to top in terms of tourism (if not football) as fans fell in love with the swagger and samba spirit across the country.

Those visiting the country now would also find that a Brazilian real costs significantly less than it has over the past 18 months, with a currency exchange rate of 26p for every real compared to 34p back in March 2013.

That saving of 8p for every real can add up pretty quickly: every £500 spending money you exchange is worth 450 more reals.

Even better for travellers is Australia. After peaking at a value of around 69p last year, the Australian dollar has tumbled. That’s good news for those going on holiday there as switching your currency can now cost as little as 55p per dollar: giving you £70 more spending money for every £500 you exchange.

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Alternatively, if your holiday this summer is already booked up you can see whether it might be worth changing some currency now, or waiting until the last possible moment. To do so, read up on traders’ sentiment via blogs or IG’s insight pages to gauge where a currency might be headed.

For instance, the euro has been on a downward trend recently, with the problems of banks in Portugal and stalling eurozone economy causing woes for the European Union.

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EUR/GBP forex prices taken from IG’s trading platform.

That has contributed to the euro being worth a fair amount less (around 5%) when compared to the pound since the beginning of the year. If you’re visiting Europe this summer and don’t think that the Eurozone will turn it around between now and your trip, you might want to wait on changing currency and eke out some more euros at the airport. Alternatively, if you see brighter times for the continent, change currency now.

It’s always worth remembering that currencies tend to move around a lot, so you could always lose out if a currency goes in the other direction. But paying attention to the experts and listening before exchanging currency is a great way to start saving on your holiday.

Spread bets and CFDs are leveraged products. Spread betting and CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

This information has been prepared by IG, a trading name of IG Markets Limited. The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

 


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