Travel costs battered by volatility in currencies

ANYONE heading abroad this Easter to visit family on the other side of the world or escape to the sun will have been watching international turmoil with concern at the impact on the cost of their holiday.

The crisis in Portugal, coming after Ireland and Greece, might have been expected to put downward pressure on the euro, bringing relief to UK travellers.

Sadly not. Sterling has plunged against the euro, pushing it back to the near parity it reached two Christmases ago. A pound will now buy just 1.07, compared with 1.20 earlier in the year.

Weeks of euro strengthening were reinforced on Thursday after the European Central Bank raised interest rates to 1.25 per cent. This coincided with the decision by the Bank of England to leave UK interest rates at 0.5 per cent.

Emma Wilson, a currency broker at forex company Currency Solutions, said: "The euro's performance has been quite something for a currency that only ten months ago was plagued with hype over potential collapse and serves to indicate the volatile nature of exchange rates in the current post-recession period.

"Even news that Portugal is to request a bail-out has not clouded the markets' tunnel vision on interest rates.

"Sterling on the other hand has been sapped of all strength against the single currency. The Bank of England's official line is that the members of the Monetary Policy Committee still yet to vote for a hike are awaiting stronger, more consistent data from the UK.

"A positive GDP figure for the first quarter could make all the difference."

The rise in euro rates was not unexpected and partly explains sterling's relentless slide, with the euro gaining by 1.79 per cent on the pound over the past month.

But that is not the end of the story. Wilson adds: "There is no certainty that the strong euro has longevity. In fact, it is quite possible that now that the interest rate decision has occurred, the infestation of debt issues in Ireland, Portugal, Spain and Greece may come more under focus, placing downward pressure on the currency. How these weaker nations will cope with a rate hike that mainly benefits the stronger parts of the Eurozone in a separate tier of recovery remains to be seen."

There was better news for anyone travelling to the US, where a pound will now buy $1.60, compared with $1.45 earlier in the year.

A Thomas Cook spokesman said: "With the US dollar, some days it's good news and others it's bad news from a customer perspective. This week and last, the rate has been moving frantically."

Turmoil in North Africa has left travellers to Egypt quids in, seeing the best rate for years at 9.54 Egyptian pounds for sterling. Similarly, the Moroccan dirham is trading at 12.6 to the pound. But euros are widely used and accepted in much of North Africa, which feeds through to the prices UK holidaymakers must pay.

Anyone hoping to spend Easter visiting family in Australia is in for the worst hammering, with the Aussie dollar more expensive than almost any time in living memory. The pound will now buy $1.54, compared with $1.76 just a few months ago.

New Zealand has been more volatile, with the currency up and down like a yo-yo all year. At the moment it is midway in its trajectory, with a pound buying 2.9 Kiwi dollars.

But examining currency movements tells only part of the story of holiday costs. Bills at resorts are the other factor to consider. The best bargains are to be found in Eastern Europe, according to a survey from Post Office Travel Money, led by the historic Baltic city of Riga, where a short break cost 115. It calculated the cost of short city breaks for Scotland on Sunday, comparing typical food, drink accommodation and excursion bills, but excluding flights to favourite holiday destinations.

Eastern capitals took the top five places. Tallinn, the capital of Estonia, was the Eurozone's best buy. But, at 142.04, Tallinn was 22.7 per cent more expensive than Riga in Latvia, which is outside the Eurozone.

Stockholm was the most expensive, with a short break costing 311.52, nearly three times as much as a Riga visit. Choosing Copenhagen over Stockholm would save travellers 17 per cent.

New York was the next priciest at 306, followed by Boston at 260. The cost of a short break in the US fell by just 1 per cent.

In Dublin, the cost of a short break, at 160.78, has fallen by 12.3 per cent over the year.

Edinburgh breaks were in the middle of the cost range, making it the ninth cheapest place for a short stay, three places higher than London. Prices in the Scottish capital were 14.5 per cent lower than in London, except for meal costs, which were 25 per cent higher.