IT'S not just American breaks that are being hit by this week's currency fluctuations. Holidays across the globe have become more expensive after the pound's weakening against the dollar - dropping to as low as $1.62, down from $2 in July.

Travel companies point out that many countries in South America, the Caribbean and Africa have currencies that are tied to the dollar. And hotels and suppliers in countries such as India and Thailand also require dollar payments, affecting dozens of other destinations.

Directors of companies contacted by Times Travel say there is a fear that the pound could slide even further after the US election on November 4, as America's financial markets are expected to gain confidence with a new president. Operators are also concerned about interest rate cuts further weakening sterling.

Noel Josephides, Sunvil's managing director, said: “I have been talking to our bankers at Barclays and they expect the pound to settle at around $1.55. A lot of African countries are tied to the dollar including Botswana and Zambia. It's the same in Venezuela, Brazil, Peru and Argentina.”

He predicted a return to Europe for many travellers, saying that America's tourism could be hit hard. Derek Moore, chairman of the Association of Independent Tour Operators, added: “The effect will be wide- ranging. Five years ago I used to have to work out the best rates for currencies in more than 20 countries. But now suppliers across the world ask for dollars or euros.”

Christmas shopping holidays in New York are likely to be the first casualty of sterling's slump. But the Association of British Travel Agents said that one silver lining of recent financial upheavals is that the price of oil has fallen and airlines such as BA and Virgin are reducing fuel surcharges.

Also, at the time of going to press, sterling had held most of its value this week against the euro - at 1.28 euros to the pound. However in June 2004, this was 1.52 euros.

Two popular destinations are bucking the trend and have seen their currencies weaken against sterling in the last month. Travelex reports that the pound is 16 per cent up against the Australian dollar and 19 per cent up against the South African rand. Meanwhile, desperate economic times in Iceland have resulted in the pound being about 39 per cent up in value against the krona since January.

And looking back at the pound-dollar rate over the years, the pound was worth $1.05 in February 1985 and $1.37 in December 2001.

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