MONEY-MARKET MAYHEM COMPLICATES LIFE

This summer, the biggest headache for families heading for Florida was squeezing the best-value package from the leading travel operators.

As the pound sinks against the dollar, the big worry could soon be finding enough spare cash for the Sunshine State.

Turmoil on currency markets could turn trips in dollar territory - currencies in South America, the Caribbean and Africa are also dollar-linked - into complex financial calculations.

Suddenly, both the yen and the dollar are in demand, with the wheezy sterling among the also-rans. If fears about our debt mountain persist, our foreign travel plans - and other areas of household spending - might need a rethink.

This summer, two adults and two children got 14-day Disney Ultimate Tickets to Orlando's big four theme parks - Magic Kingdom, Epcot, Hollywood Studios, Animal Kingdom - and several smaller ones for around £630.


At Attraction Tickets Direct (ATD), managing director Oliver Brendon says the current price is £786, largely because he hedged enough currency to hold a conversion rate of 1.75 dollars to the pound - against a current New York tourist rate of around 1.50 dollars.


ATD customers can pay a 10% deposit to guarantee the current ticket price for summer 2009 - or less if the price falls.

"In two months, the pound has lost 27% against the dollar, hitting the spending power of Brits in Florida," Brendon says.

The good news for holidaymakers is that cash-strapped operators are cutting prices to early bookers for summer 2009.

Thomson's Al Fresco camping division, for instance, offers seven nights for a family of four on Spain's Costa Dorada next April from £249, including the Channel ferries and saving £280 on the 2008 brochure price.

Some of the 800,000 Britons with holiday homes abroad might do even better from the mayhem.

At currency specialist FC Exchange, managing director Nick Fullerton says: "A Eurozone home sold at 200,000 euros would give its British owner in the region of £157,500 - about £22,000 up on the value of a year ago.

"With the Euro strong and sterling taking a battering, and no improvement likely in the foreseeable future, investors may be better off taking advantage of currency rates, selling a Eurozone home to bring money back to the UK."

Don't do anything as drastic as that, says Stuart Law, chief executive of property investment company Assetz. He says savvy homeowners in France - and possibly Spain and Portugal too, if they own plenty of equity in their home - can raise loans on homes abroad to settle debts in Britain, with Euro mortgage rates below those in Britain.

"In France, until the last couple of years, there hasn't been much scope to raise money against property, and many British owners paid cash some years ago," Law says.

"At 1.24 euros to the pound, it may be efficient to use a Euro-mortgage in France - typically a repayment loan over 10-15 years - to raise funds against the credit crunch in the UK, or possibly to help children buy their first home."

Meanwhile, Britons fleeing the UK for good - nearly two million have left since 1997 - are using forward contracts to reserve weaker currencies, notably Australian and New Zealand dollars and South African rands, at a rate linked to the current one for up to two years, by paying a 10% deposit.


When the rand plunged 20% in a week in mid-October, Britons moving money to South Africa must have been tempted to lock onto the lower rate for up to two years ahead.


"What makes the present situation exceptional," says Nick Fullerton at FC Exchange, "is that major currencies, normally range-bound, are fluctuating more wildly.

"If you are moving £300,000 to Australia, the rate can move 20% in 24 hours - that's £60,000 up or down on the day before. It's huge stuff, and possibly why we have had the busiest trading month ever."

Fullerton says this is also a good time for British workers abroad to repatriate dollar and Euro-based earnings to the UK. His firm acts for employers, including film companies in South Africa and oil rig teams in Qatar, in transferring wages to UK bank accounts.

"We have pilots based abroad who want to be sure they get the same amount of sterling each month. Otherwise their wage is at the mercy of the markets," Fullerton says.

"If they are going to earn 180,000 euros a year, they send a 10% deposit - 18,000 euros - to take out 12 forward contracts on their behalf to ensure their sterling income is constant."
Can private investors cash in on the currency wobbles?

Fullerton says dabblers in currency markets are likely to burn their fingers.

Paul Dimambro, head of the Hargreaves Lansdown Currency Service, says intrepid investors use spread betting or Contracts for Difference to cash in on currency wobbles - although shrewder customers might have opened dollar-based accounts in a UK bank when sterling hit 2.11 dollars earlier this year.

"But you must remember," Dimambro says, "that interest on these accounts is low, currently below 1%. They depend on currency movements to deliver the return."

Hargreaves Lansdown, which promises exchange rates significantly better than those from banks, confirms strong demand from clients buying homes abroad.

Few can predict where rates go from here, but travellers who follow exchange rates closely in the days before departure and load a pre-paid card will tend to get an exchange rate around 10% above rates available at the airport.

Nationwide's debit card doesn't charge on overseas transactions, and money can be switched from a Flex account just before departure.

As a pre-paid Mastercard debit card loaded in advance with Euros or dollars, the FairFX Currency Card promises a keen exchange rate and close control of spending abroad. It charges no fee on retail transactions in the UK or abroad, and can be reloaded abroad free of charge, by mobile phone or internet.

Stephen Heath of FairFX says: "Although we can't give advice, we give flexibility to top up a card when the pound is stronger, and our internet model cuts costs to ensure a good exchange rate."

The FairFX euro card has a £9.95 fee, which is waived if it is loaded with a minimum £500 or obtained through the website www.moneysupermarket.com. On cash withdrawals abroad from ATMs, there is a £1.50 charge.