Take advantage of devaluing currencies for your travels

Posted on December 22, 2015 by in Currency Arbitrage

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If you follow the news for the last few months you will have occasionally seen the news of a currency devaluing or dropping the peg to the dollar.

While the world does not face a financial crisis like in 2008 what we see right now is the end of the ‘commodity super cycle’ and many commodity producers (mostly oil that is) have to re-balance their budgets.

Fixed currency exchange rates are popular in many countries for their simplicity and predictability. It’s easier to plan vacations and easier for companies to plan imports and exports. Unfortunately it does Not work and once commodity prices drop substantially (as they do now) the central banks of the countries with a pegged currency has to buy and sell currencies and losing billions in the process. Pegged exchange rates are almost never a good idea.

Not every country relies on oil as a main income but many did and do. Once a countries peg is dropped it floats freely and they become usually much cheaper to foreign buyers and tourists.

Here is a collection of more adventurous destinations that have seen their currencies drop – consider visiting in the next 24 months while prices stay low.

Russia

Russia has been an extraordinarily expensive place for travelers accounting in US Dollars as recently as 2013 (when I visited) with room rates exceeding $500 for most days but it is now a steal with the excellent Marriott Tverskaya for as little as $80. The rouble hit 72 against one dollar last week – that is 20% better than in May this year when I detailed my impressions of Novosibirsk and Irkutsk.

Brazil

Hotels in Brazil used to be extremely expensive (as well as other local services) and American tourists easily felt ‘poor’. Not anymore with the Brazilian Real dropping to 4 Real for 1 Dollar the country has become a bargain.

I will be in Northern Brazil in January and I just picked my hotel. The whole city did not have a hotel that would cost more than $35 out of all hotels and that is including a 4 star chain hotel!

Argentina

Argentina had gotten used to the dual currency regime of credit card and cash rates (blue peso). When I stopped by the last time I ran out of cash quickly since it would have been foolish to pay with your credit card. However ATMs also gave you the official (expensive!) exchange rate so I cut my visit short.

Now the country has dropped the foolish regime and you can use credit cards again – the Argentine peso’ official exchange rate dropped 40% and it already shows (it usually takes a while for devaluations to trickle through) with prices for the Intercontinental Mendoza and the Park Hyatt Mendoza that suddenly look like a steal!

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Kazakhstan

Earlier this year the Kazakhstan Tenge devalued and you can now get almost 360 Tenge for one Dollar (up from 180) when visited Almaty and Astana this year.

It took a few months but pretty much everything is half off now including hotels and food. Almaty was expensive before but is now a bargain!

Almaty is a modern, decidedly Western city – a great hub for a central Asia exploration!

Azerbaijan

The latest central Asian country to adopt a floating exchange regime is Azerbaijan which saw the Manat drop by 32% this week. Hotels in the country’s capital haven’t really changed but the country will likely become much more affordable to explore within two months.

Colombia

While the Colombia Peso moved from 2,000 COP for a dollar to 3,300 COP most of the hotel rates seem to be unaffected (and are still on the high side). I will be back in June 2016 and so far things look as expensive (or cheap) as before.

More countries

Several Gulf countries (not the UAE though!) and many African countries will likely allow their currencies to free-float which will help travelers to make prices more affordable there. Watch out for Kuwait, Bahrain, Nigeria and Equatorial Guinea coming out with such news soon.

Conclusion

It’s a great time for dollar earners in this world where brains suddenly matter again and commodities devalue. We all know how much a bargain improves the travel experience – even if one is not through miles and points 🙂

When traveling to countries with a devalued currency you are also helping by bringing in more foreign currency and increasing demand for local services so don’t feel bad about it!