The pound's strength against the euro and dollar has left some currency experts suggesting that you stock up on holiday money now. But will it strengthen further and what is the cheapest way to benefit when the pound is strong?
The crisis in the eurozone has pushed the euro's value down against the pound in recent months, meaning that those who are taking their holidays in mainland Europe could end up getting more for their money than they did last year.
Customers who bought £100 of euros now could get €122 for their money, compared with €111 last July. Those going to the US could get $160 for £100, compared with $142 in May 2010.
A spokesperson for currencies.co.uk, said that the sterling exchange rate "is currently the best it has been for years against all other major currencies". However, he warned that the Government may take action to reduce the strength of the pound because of the effect that it is having on exports.
"With that in mind we would advise those looking to exchange sterling to be wary of the recent pound strength and look to exchange as soon as possible. It may also be worth considering a forward contract to fix the exchange rate at its current level."However, another spokesperson at currency broker HIFX, said that they believed sterling was in a good position and could become even stronger. "Buying euros must be tempting right now, but I think the UK economy is in much better shape than the eurozone so there may be more of a rally to come," he said.
Those who do wish to take advantage of the current rates, whether because they live abroad or are planning a holiday in the months to come, can do so in a variety of ways. Preloaded currency cards are convenient for those who want to buy hundreds of pounds worth of euros for a holiday. However, it is worth noting that money does not have the same protection in the event of a firm going bust as it would in an ordinary bank account. This is because you do not have the same protection under the Financial Services Compensation Scheme.
These cards allow you to buy currency at today's prices and hold it on a card until you wish to spend it. While it is there it does not earn interest. However, you effectively "lock in" today's exchange rate, and these cards can be a cost-effective way of spending abroad.
Two of the best-known prepaid cards are FairFX and Caxton FX, which come in dollar or euro formats. These come with slightly different fees and charges and tend to be only slightly more expensive to use abroad than the very best credit and debit cards. If you don't have a specialist credit or debit card for spending overseas they are likely to be a good option as well as allowing you to buy your currency when sterling is strong.
Those who wish to buy larger amounts of currency could use a money broker. These specialists can allow you to buy larger amounts of money at an advantageous rate. Or you could lock yourself into a more expensive "forward contract". This would give you the price available now for up to two years. This may be worth doing if you are about to buy a property abroad, for example. A specialist broker is often cheaper than a bank.
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