Portugal has been named as the cheapest holiday destination in the world for Britons this year.

The country’s perennially popular southern coastal region, the Algarve, came top in the Post Office’s annual Holiday Costs Barometer, which takes into account the average price of eight essential purchases, including an evening meal for two, a beer, a coffee and a bottle of suncream, in 44 popular spots.

The Algarve pipped Bulgaria’s Sunny Beach, with the total cost of the eight items coming in at the equivalent of £33.36, just 17p less than its Eastern European rival. Spain's Costa del Sol followed in third, ahead of Marmaris, Turkey, and the Czech Republic.

The Japanese capital of Tokyo, where the items cost £58.47, on average, was the only destination outside of Europe to feature in the top 10.

After a tumultuous year for the pound, which fell heavily against the euro and dollar in June, before regaining some ground, British holidaymakers are being urged to keep a close eye on how currency affects costs before deciding where to travel.

“Keeping an eye on rates is a smart move,” said Ian Strafford-Taylor, ceo of currency analysts FairFX. “Even over the course of the last three months, we’ve seen difference of 8 per cent between the pound-euro exchange. The truth is that you’re only forced into accepting a poor rate if you have no other choice.”

Cancun is the third cheapest long-haul destination

“Holidaymakers who are truly savvy will be planning their travel money now and they’ll be the ones who get the biggest bang for their buck.”

Andrew Brown of Post Office’s travel money said it also pays to research where in-resort prices have fallen. For example, in the Algarve the cost of a evening meal for two is down 5 per cent on last year.

“Holidaymakers can do little about sterling’s value but they can do their homework and plan trips to resorts or cities where prices for meals, drinks and other tourist staples are low,” he said.

“Much of Europe still offers good value, with prices on the ground falling in half of the European destinations we surveyed.

“Further afield Tokyo and Cancun are good bets for bargain hunters but don’t discount Cape Town or Bali. If the rand (South Africa) and rupiah (Indonesia) fall in value, low costs on the ground could makes these great choices, too.”

South Africa ranked 11th (£65.37) in the Post Office's price survey, with Indonesia 13th (£67.11). The Post Office said costs in Bali had more than doubled in the last three years, when its leading resort, Kuta, took top spot. Cape Town, too, has fallen in the rankings, from third last year to 11th, with the pound losing value against the rand.

Though sterling hit dizzy heights in the summer of 2015, when £1 bought €1.44, Brown pointed out that its value is now comparable to where it was in 2012.

“This year’s report puts 2016’s sterling fall into perspective,” he said. “The pound may be weaker than 12 months ago but if you compare today’s rates with those five years ago, sterling is stronger now against 60 per cent of our 40 best-selling currencies.”

Brown cited South Africa, Mexico and Japan as examples of where Britons are finding much better value than they were five years ago, with sterling up 41 per cent against the rand and 25 per cent against the peso and the yen.