I normally post my annual travel-oriented currency outlook at the very beginning of the year but due to other commitments, it took me only now to publish it. As we start a new year, we once again look for travel ideas and aim to scale new depths where travel is concerned. There are several factors that may affect your decision on where to go but one that is widely considered is to go somewhere that is cheaper than it used to be only a short time back. This tactic worked very well for Japan when the Yen depreciated by as much as 60% against the US Dollar in 2 years. The same happened in the middle of 2016 when the UK voted for Brexit and the Pound Sterling plunged by 15%, triggering an influx of tourists visiting the UK for shopping and sightseeing.
So what’s in store for 2017? I have by no means a crystal ball. Looking at my list from 2016, I got about 3 out of 5 correctly including the outlook for Chinese Yuan which dropped quite substantially last year. I also identified 3 places to avoid last year based on the expectation that those countries’ currencies will strengthen and got 2/3 correct.
Here are some currency themes to look at to help you get the most bang for your buck for your travels this year:
UK: Cheaper First Half, Possible Rise in the Pound Later in the Year
One destination which received a lot of attention last year due to currency was the United Kingdom. The Pound Sterling tested 30-year lows against the US Dollar last year and is starting the year weak once again as the country prepares to move out of the EU Single Market.
If you have been thinking of visiting the UK to take advantage of cheaper shopping opportunities or simply to go sightseeing with a less of a pain in your pocket, you could probably expect the Pound to remain weak in the first half of the year. The GBP could recover in the second half of the year as financial markets realize that the UK economy isn’t deteriorating as sharply as they initially expected it to.
Euro Zone : Remain Weak, Possible Parity with the US Dollar This Year
I am including the Euro Zone (i.e. France, Germany, Italy, Spain, etc) in this list for a third year in a row. With lingering political uncertainty plus ultra low interest rates in Europe, the Euro is expected to reach parity (i.e. 1 is to 1) against the US Dollar, something that hasn’t happened in over a decade.
With oil prices remaining low (and plane tickets cheaper!), now – more than ever – would be a good time to head to Europe for a break.
Mexico: Another Brick in the Wall
The Mexican Peso has depreciated significantly against the US Dollar since Donald Trump won the elections. Some argue that the currency was oversold and might stage a comeback in 2017 but given Trump’s unpredictable statements (and how these can move currency markets), we might just see further downside in Mexico’s currency this year.
Turkey: Even Better Value This Year
One of the worst-performing currencies in 2016 looks set to make a repeat this year. In 2016, the Turkish Lira depreciated by around 17% against the US Dollar. Within the first few weeks of January alone, it has dropped by another 8% and there seems to be no end in sight.
Turkey has never really been an expensive place to visit. The most expensive part is probably your transport fare getting there. But if you fancy a visit to Hagia Sophia or to the fairy chimneys in Cappadocia, you’ll find that Turkey is one of the cheapest major tourist destination you can visit this year.
Malaysia: Stronger Commodity Prices Outweighed by Policy Outlook and Slowdown in Trade
2016 was not a good year for the Malaysian Ringgit and one of the reasons was because of the continued weakness in commodities. While commodities are expected to recover somewhat in 2017, other factors such as differences in policy between the US and Malaysia (US is expected to hike rates while Malaysia seen to keep rates steady) and a slowdown in Malaysia’s largest trade partner, China, are expected to keep the Ringgit low in 2017.
USA: A Strengthening US Dollar, A More Expensive Place
A theme that is widely expected to play out this year is the continuing strength of the US Dollar. This is because of the new Trump presidency and the policies that he expects to implement. If you happen to be a US resident or earn primarily in USD, you can expect to get more bang for your buck almost everywhere you go in 2017. If you are earn in any other currency aside from the USD, you will find traveling around the United States more expensive this year.
For definitions on financial market terms stated above, you can check out this link