Photographer: Mike Hewitt/Getty Images

The Rugby World Cup’s Big Match: Fans vs. the British Pound

Fans of the southern hemisphere’s rugby superpowers might have to drink less beer to stay solvent during the World Cup.

The turmoil in global currency markets is throwing up anomalies ahead of the Rugby World Cup that starts in Britain next week.

Should South Africa’s Springboks win the sport’s showcase tournament, they’ll each receive a bonus of 1.7 million rand, or about $122,000. A year ago, that would have translated into $155,000. Meanwhile, the price of beer, food and entertainment has soared for visiting fans from rugby-besotted South Africa, Australia and New Zealand, among the favorites to win.

The discrepancies show just how much the currencies of commodity exporters have tumbled this year as China’s economic slowdown drove the prices of raw materials from iron ore to coal to 16-year lows. The differences are exaggerated against the pound, which has gained on speculation the Bank of England will be the first major central bank to follow the Federal Reserve in raising interest rates. The British currency has appreciated against all but two of its 16 major peers in the past year, strengthening more than 15 percent versus the rand, Aussie and kiwi.

“If you are coming from Australia, South Africa and New Zealand to watch the rugby, you are going to find things expensive; there’s no doubt about that,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “The pound might be under-performing at the moment on weaker data, but the structural direction against commodity currencies is still intact.”

The pound has climbed 7 percent in 2015 against a basket of nine developed-nation currencies, rising last month to the strongest level since October 2008. South Africa’s rand has slumped 17 percent in the period, reaching a record 21.5584 per pound on Aug. 24. New Zealand, whose All Blacks are the reigning champions, has fared even worse, with the kiwi declining 18 percent, while the Aussie has weakened 13 percent.

Strong Pound Weighs on Rugby World Cup

That’s left the rand 62 percent undervalued against the pound, the New Zealand dollar 28 percent and the Aussie 25 percent, according to the BigMac index, a purchasing-power measure. The three nations are past winners of the William Webb Ellis Cup, named after the Rugby School pupil who, according to a popular myth, invented rugby by picking up the ball during a football game.

“A friend told me that he reckons standard price will be 5 pounds a beer,” Byron Lotter, a portfolio manager at Johannesburg-based Vestact Ltd. who managed to get tickets for the semi-final, said in an e-mailed response to questions on Aug. 25.  “That’s over 100 rand a drink,” or more than four times the price in South Africa, he said.

The pain is particularly acute in New Zealand, a country so rugby-obsessed that its minister responsible for the 2011 World Cup faced calls to be stripped of the job because he was concentrating too much on his other portfolio as Minister for Foreign Affairs.

‘Don’t Care’

Even so, there’s “no point in asking a Kiwi” if the currency will put them off traveling, Tim Kelleher, head of institutional foreign-exchange sales at ASB Institutional in Auckland, said by instant-message. “We don’t care about the money, just the game.”

Most die-hard fans, of course, booked tickets well in advance. That’s a sunk cost, and expenses incurred on the trip are something to worry about later, said Australian Andrew Taylor, a 25-year-old sales manager who will be traveling with three friends to watch the games. He’s got a two-year work visa and plans to stay in the U.K. after the event to pay down the costs in pounds.

Photographer: Matt Roberts/Getty Images

“We’ve definitely talked about the fluctuation, and how we should have bought pounds a while ago,” Taylor said by phone from Sydney. “You save your money so you can do things like this. Even if it was worse we’d still be doing the same.”

We Love Rugby, a Sydney-based sports travel agency which has sold packages to take about 1,500 fans to the event and on sightseeing trips around the U.K., has been protected by booking early.

“We reserved all our allocations over a year-and-a-half ago,” sales manager Chanelle Quealy said by phone. “We haven’t had a fluctuation due to the currency.”

The pound’s 1 percent slide versus the dollar since China’s currency devaluation on Aug. 11 will probably be of no comfort for travelers carrying rand, or the Australian and New Zealand dollars. They each dropped versus the pound on Thursday, after the Bank of England reaffirmed that China’s slowdown hadn’t weakened its conviction that the time for Britain’s first-interest rate increase since 2007 is approaching. Sterling has slipped 1.6 percent against a basket of major peers since reaching a seven-year high on Aug. 5.

“Sterling could hold up against the weaker commodity-related currencies” even as it struggles against the dollar, said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “It’s a very divergent picture.”

With assistance from David Fickling and Michael G. Wilson in Sydney

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