Business

Holiday advice for a value vacation

  • 5 October 2013
  • From the section Business
Entabeni Safari Conservancy
Image caption South African safaris have become more affordable after a 25% fall in the rand this year

If you are already missing the sunshine then here is something to consider.

The pound is having a revival on the currency markets, thanks to the strengthening British economy.

It is a welcome change for British tourists who saw the pound slump after the 2008 financial crisis.

But the economy has perked up and sterling has seen a spectacular rise against some currencies this year.

And there are other trends in the currency market which are making a difference.

Now obviously changes in the value of the pound are not the top priority when it comes to choosing a holiday destination, not least because some cheap countries are not particularly safe.

And it is impossible to predict exactly what's going to happen on the markets.

(You can check travel advice from the Foreign Office here.)

But after years of suffering the effects of a weak pound, travellers may be tempted by countries that are once again looking like good value.

Currency experts in the City of London have given their views on where that value can be found over the next 12 months.

South Africa

South Africa is one of a group of nations which, in economic circles, are called the Brics.

Along with Brazil, Russia, India and China, it was favoured by investors for its fast-growing economy.

But it has run into trouble recently.

Prices for its main exports such as gold, platinum and diamonds have fallen and the mining industry has also been hit by labour trouble.

As a result the South African rand has plunged 25% this year.

"There are question marks over the economy," says Jeremy Stretch, market strategist at CIBC.

"Even if sterling does badly I expect the rand to underperform."

India

Another nation that has fallen out of favour with international investors is India.

Economic growth has been weak and the government has struggled to push through reform that economists say would lift growth.

This year the rupee has fallen 12% against the pound.

Analysts say the situation is unlikely to change in the near future.

"India will always be vulnerable," says Jane Foley, senior forex strategist at Rabobank in London.

"India has disappointing growth and a lack of reform and other emerging markets will be seen as better bets."

Image caption India has fallen out of favour with investors

Australia

The Australian economy has become tied to the fortunes of China.

Much of its iron ore and other commodities are exported there.

But prices and volumes have fallen and so has the Australian dollar.

It is down more than 10% against the pound this year, currently trading at around 1.73 Australian dollars to the pound.

"The Oz dollar has been overvalued since mid-2010," says Jeremy Stretch.

"It (the pound) will probably get to 1.85, maybe 1.90, but not as high as 2. That overvaluation is dissipating."

Image caption A weak Australian dollar: A chance to take up surfing?

Turkey

Turkey's economy has been a success story in recent years.

But protests against the government in June have unsettled investors. Confidence in Turkey is also vulnerable to unrest in Syria and to a lesser extent Egypt.

The Turkish lira is down 12% against the pound so far this year. But since the worst of the financial crisis in 2008, the lira has fallen 50% against the pound.

"It's been a very, very big move," says Neil Mellor, currency strategist at Bank of New York Mellon in London.

"But it's very hard to know with emerging markets because they are illiquid. If political tensions ease there would be a rapid move back.

"If I was going to to Turkey I would buy my lira now."

Anyone considering a visit to Turkey should check on the latest advice from the Foreign Office.

Image caption Protests over the summer raised concern about Turkey's political situation

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