Canadian Dollar Falling: Time to Pull the Trigger?

by Jay Thompson on August 19, 2008

The Canadian Dollar / US Dollar Exchange rate has taken a beating lately (from the Canadian perspective). At this moment in time, the Loonie is worth 0.9421 U.S. dollars.

This is off from a high of about $1.08 in November of 2007.

Here is a 3 month chart:

CAD vs USD 3 Month

While the drop around the beginning of August looks precipitous, let’s keep it in perspective with historical exchange rates:

CAD vs USD 5 year

Even at $0.94, the Canadian dollar is still strong against the greenback (or the US dollar is weak, depending on your perspective).

Consider locking in exchange rates

None-the-less, when one is looking at the tens to hundreds of thousands of dollars a real estate transaction entails, a few cents in the exchange rate either way can have a pretty significant impact. Canadians contemplating buying US property would be well advised to keep an eye on exchange rates.

One thing our northernly neighbors may want to consider is “locking in” the current exchange rate. Globex Foreign Exchange, based in Edmonton, Alberta, offers “forward contracts” that allow you to do just that. They also offer better exchange rates than banks due to lower markups. For information, give Snow An at Globex a call. Her contact info is here (at the bottom of the article).

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Kevin Schmidtchen

I would not worry too much about the US dollar strenthening too soon. I think the buying window for Canadians will extend easily into 2009. There are too many economic concerns here in the US.

Blog: www.SantaBarbaraRealEstateVoice.com

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George O&amp;#039;Neill

...and my U.S. stock holdings have taken a beating because of the currency decline....

Oh well, at least the real estate market in Toronto is still strong :)

George

Larry Yatkowsky

Jay,

This may help to explain some of the Loonies Lack Luster. We are suffering a bit of inflation up here as well. Most of our base costs have increased and we are seeing slowing RE Markets in almost every province. This from StatsCan.

"Consumer prices rose 3.4% in July 2008 compared with July 2007, an increase from the 3.1% rise recorded in the 12 months to June 2008."

Edge

In the spirit of leverage as a concept, while those numbers don't look like enough for me to pack up and cross the country to go on a shopping spree, I can imagine how happy it'd make some investors who have hundreds of thousands of dollars on the line.

I'll be curious to see how the dollar goes as well. With the GSE problems and bank failures all over the place, an increase in the dollar almost seems like a calm before the storm.

Jay - The Phoenix Re

I agree that the whole "inflation deal" could make the dollar situation interesting. I won't pretend to be even close to understanding the dynamics of currency exchange and valuation, but it is a fascinating field of study.

Maybe I should have paid more attention in those Economics courses...

George O&#39;Neill

Shailesh Ghimire

A few days ago the WSJ has a great article on the strengthening US dollar. I guess what goes up must come down. The only thing that leaves me wondering is the strength of this trend and where it might stabilize in the near future. Because with inflation making some noise, the dollar could end up getting weak all over again. Only time will tell.