WHEN investment bank Goldman Sachs recommends clients to sell the once-mighty pound in favour of the Brazilian real and Russian rouble, as it did this year, and when Poles are reported to be leaving Britain because they can no longer get so many zloty for their pound, it’s clear sterling has lost its shine.

The euro set record highs against the pound for four straight days last week, closing at 80.29p on Friday, after the Bank of England cut rates by a quarter point to 5% while the European Central Bank kept rates on hold.

If higher utility bills, rising petrol costs and the mortgage repayment shock weren’t enough for hard-pressed families, they now face paying hundreds of pounds more for their summer holidays on the Continent.

With the average spend on a week’s holiday for a family of four around £2,000, according to Thomas Cook, we face paying an extra £300 this year because of the pound’s 15% fall against the euro in the past 12 months, from €1.47 to €1.25.

Sterling’s slide is also bad news for anyone buying a second home on the Continent – in the past eight months a €200,000 European property has become £24,677 more expensive to a British buyer.

The silver lining is that the foreign-exchange markets are slowly opening up to private investors, making it easier to hedge against the rising euro.

For a market with daily trading volumes 10 times those of the stock market - £3.2 trillion compared with £300 billion – foreign exchange has always been a relative mystery to the average investor – until now.

There are a growing number of currency funds if you want a manager to do the work for you – although returns suggest they do not justify their fees. Alternatively, Deutsche Bank recently launched Europe’s first exchange-traded currency funds, listed in Frankfurt. ETFs track a market like an index fund, but can be traded daily like shares.

On the Continent, prepaid cards now let you load up on euros when the exchange rate is in your favour, rather than being hostage to the rate when you travel.

The only question is whether you should be changing the pound in your pocket now before sterling gets weaker, or whether this is as bad as it gets.

While few investment banks would bet against the euro going up to 85p or even 86p in the short term, many forecast that it will be weaker by the end of the year. Currency strategist David Bloom from HSBC’s investment bank told me last week it will be back at 77p by December – although he thinks sterling will continue to drop against the dollar, from $1.97 to $1.75.

So if your European break is imminent, it might be worth taking out a prepaid card, but looking further ahead is a gamble.

One of these cards could potentially save your family €140 if the euro did strengthen a further 6% against the pound – and the cards can work out cheaper than using a debit card.

If you had loaded up a FairFX Euro currency card with £100 on Friday, you would have got €123.69, against €119.60 if you used your debit card to make a purchase overseas.

If the euro rose to 85p in the short term, as some analysts expect, you would save €7 for every £100 of holiday spending.

The card has no application fee, as long as you load it with more than £500, although there is a an €1.50 charge when you withdraw cash in Europe.

As far as investment is concerned, however, the smart money is going further afield. The currencies that are getting the City really excited are those of the Bric economies (Brazil, Russia, India and China). Goldman Sachs told clients at the start of the year they should sell the Canadian dollar, the British pound and the US dollar in favour of the Brazilian real and the Russian rouble.

These currencies are looking like a better bet than their equity markets, which have struggled to “decouple” from the global slowdown. Their currencies are being driven by other factors.

In Russia, inflation is forecast to be nearly 11% this year, more than 4% above the central bank’s target, which makes it more likely that interest rates will go up – good for the rouble.

The country has a forecast current-account surplus of 6.4% of gross domestic product compared with a deficit of 3.3% in Britain and 4.5% in America – all a recipe for a strong currency.

China’s currency pushed through the key barrier of 7 renminbi to the dollar last week, following the news that last year’s economic growth had been revised up from 11.4% to 11.9%.

Goldman recently put together a product that offers 130% of the rise in the Bric currencies plus your capital back if you hold for the full three-year term, although it is only available through advisers such as Seven Investment Management.

Alternatively, Morgan Stanley’s Market Vectors Chinese Renminbi/USD exchange-traded note tracks the S&P Chinese Renminbi total return index.

If that all sounds too exotic, there are managed forex funds where a professional will pick the currencies for you, but their performance doesn’t match their promise. Of the seven funds registered in Britain, only one – Investec Managed Currency – has beaten cash with a return of 17% over the past three years, according to Killik & Co analysis.

For most investors, therefore, the best way to profit remains buying good-value stocks or funds in the countries you like. In Europe, healthcare firms such as Germany’s Bayer did well during the last US recession, as did infrastructure firms such as Hochtief. And you should get the double whammy of an appreciating currency too – at least in the short term.

Kathryn Cooper is editor of the Money section