Parity for the Dollar, Opportunities for You!
There's a consensus that the Canadian dollar is entering a period of sustained strength against the U.S. dollar, and that means all kinds of opportunities for you in your spending, travelling and investing. Here are five things you can do to benefit:
1. Open a U.S. dollar bank account
Planning to travel to the United States in the near or distant future? Be ready with a stockpile of cash held in a U.S.-dollar bank account. Pretty much all banks offer them, but don't sign up without comparing your options. If you plan to use your credit card a lot while travelling in the United States, it makes sense to have a U.S.-dollar account partnered with a U.S. dollar credit card. That way, you can pay your credit card bills without getting dinged with the 2.5-per-cent currency conversion fee that most financial institutions charge when you use their cards to buy items in foreign currencies.
2. Buy something expensive that's falling in price
Porsche Canada has just announced a “currency credit” program that cuts prices by $4,000 to as much as $8,000 to $10,500. Boxster now costs $55,600; Cayenne is down to $54,200 from $60,100. Another retailer cutting prices as a result of the dollar's strength is Brooks Brothers, the upper crust clothier. As of April 1, three Brooks Brothers non-iron shirts can be had for $89.50 each, down from $108. The price cuts remain in effect as long as the dollar remains strong.
3. If you're a snowbird, think about converting a chunk of your savings or investments to U.S. dollars for future use
Many snowbirds exchange Canadian dollars into U.S. currency on an as-needed basis, which means they're getting good exchange rates some years and terrible rates in other years.
Now, there's a chance to make a big lump-sum conversion of Canadian dollars at a moment when $1 Canadian is pretty much the same as $1 U.S. As well as allowing you to capture an exchange rate at parity, a lump-sum cash conversion into U.S. dollars can also save you on fees. You avoid a year-by-year accumulation of fees, and conversions fees for large amounts can be discounted somewhat.
4. If you're not a snowbird, become one by buying some U.S. real estate
Canadians started to get excited about buying U.S. real estate when the loonie was last at parity, back in late 2007. Then the currency started to fall and the deals didn't look so good. Now, they're far better. While our dollar was returning to parity, U.S. home prices fell even further. The market for lower-priced condos and homes in Arizona and Florida is starting to pick up, but a nice condo for well under $100,000 is still quite realistic.
5. Buy some U.S. stocks
A rising Canadian dollar neutralizes returns from U.S. and global assets. The solution: buy when the dollar is at a high point, like it is now. Long term, many currency watchers see our dollar falling below parity again. When that happens, your returns in U.S.-dollar investments will be enhanced by the currency.
Rob Carrick, Ottawa
Globe and Mail Update
Published on Tuesday, April 6, 2010