The pound slumped to a 40-year low against the dollar this week as markets were spooked by the turbo-charged tax cutting measures announced by the Chancellor during last week’s mini Budget.

It resulted in a sell-off with the pound falling to $1.03 amid fears it could hit parity with the US dollar. Sterling has also weakened against the euro and the yen.

This is bad news for any holidaymakers heading to the States, Europe or Japan as you’ll get less foreign currency for your pound. It also impacts other destinations where the currency is benchmarked against USD, such as the Indian rupee, Australian and Canadian dollar, the Swiss franc and Malaysian ringgit, according to financial brokerage XTB.

However, on the flip side, if you’ve leftover currency from these regions, the pound’s current weakness means it could be an ideal time to exchange foreign notes.

And with research from Tesco Bank suggesting holidaymakers come back with an average of £60 in foreign currency – while a fifth have more than £100 lying around – here’s how to get more of your pounds back.

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Pound’s weakness is good news for foreign currency exchanges

Last year it cost £730 to buy $1,000 while now it costs £935 to get the same amount – bad news for anyone heading state-side.

Meanwhile Interactive Investor says last year Brits heading to Europe could exchange £855 for €1,000 while now they need to stump up £901 to get the same amount.

But if you’ve come back with dollars or euros, you want the foreign currency to be strong and the pound to be weak.

Exchange rate comparison site Compare Holiday Money, explains: “If you are buying travel money you want the pound to be strong so when you buy the currency of your destination, you get more of them for each pound that you spend. This is no different to trying to buy something while it is on special offer in a store. The cheaper it is, the more you can buy.

“When you return from holiday and you have leftover currency, you are going in the opposite direction. A strong pound makes your foreign currency look less valuable. If you can hold on until the pound weakens, then you will get more pounds back when you exchange your currency.

“This is like trying to return those things you bought on special offer so when they are back to full price, you get more money back. That doesn’t work in most shops, but it does work for currency because of the way the markets work.”

As an example, if it’s $1.13 for £1, you’ll need more of your leftover dollars in exchange for a single pound. If it’s trading at $1.03 for a pound, you’ll need fewer dollars to exchange per £1 which is the situation in which we now find ourselves.

How to exchange foreign currency for maximum pounds

Here are three ways to help you exchange your leftover currency for the maximum amount of pounds:

Compare and convert buy back rates

You could head to the bureau de change you bought your holiday money from for it to buy back your foreign currency.

Or you can visit Compare Holiday Money which is a free-to-use exchange rate comparison site. It checks the rates on around 70 currencies.

You tell it what you want to sell and you can choose to exchange your currency in person at selected stores or you can send it by post, though there will be a cost to this so make sure you factor this in.

A quick comparison of selling dollars for pounds reveals that for $100, you could get back £90.98 in person (1.09 buy back rate) or £85.63 (including £6.70 postage and a buy back rate of 1.08). As a rate comparison, yesterday 1 USD = 0.9307 GBP (or 1.075 USD = 1 GBP). On 12 September, 1 USD = 0.851 GBP (or 1.175 USD = 1 GBP).

It also lists a buyback rate history resource to help you decide if now is a good time to sell your foreign currency.

Currently it states: “Over the past 30 days, the US dollar buy back rate has increased by 9.56% against the British pound from 0.8495 on 28 August to 0.9307 yesterday. This means US dollars are worth more today compared to one month ago.

“If you were exchanging $200, you would get approximately £186.13 today which is £16.24 more than you would have got on 28 August.”

Buyers – that is the individual currency bureaux – may not accept coins or higher denominations (such as €500 notes). With higher amounts, it may be best to opt for special delivery so the money doesn’t go missing along the way.

It’s also worth checking MoneySavingExpert.com’s Travel Money Max. Again, it compares a number of bureaux where you can sell your foreign currency.

It lists the top rate of $100 for £89.69.

Sell to family and friends

If you have leftover currency and you know a relative, friend or colleague is heading overseas then consider selling them your money.

By cutting out the commission and fees associated with exchange bureaux, each of you should be able to save a few quid.

You can use sites such as Xe.com or Oanda.com to keep track of exchange rates and currency markets. You can also Google a pairing such as ‘euro-pound’ or ‘pound dollar’ or check Bloomberg and Yahoo Finance, which provide data to compare currency to help you both come up with a competitive rate.

Gift to charity

Chances are, if you’ve left foreign currency lying around from this summer holiday or from past holidays, you may not miss it. Though given the current cost-of-living crisis, you may want to get as many pounds as possible back into your piggy bank.

But if you can spare it, consider gifting to charity. This could mean slipping your coins and notes into the envelopes supplied on airplanes, rolling them inside donation banks at museums or see if your local charity will accept them.

As an example, Oxfam’s partnered with Cash4Coins which works with businesses, banks and charities to exchange foreign coins and banknotes.

You can pop into your local Oxfam or via its postal service where Cash4Coins will collect, sort and count the currency donated, helping it turn donation into revenue for Oxfam’s work.