The temptation here is to sell U.S.-dollar assets high and buy Canadian-dollar assets low
The Bank of Canada has delivered one of the more intriguing trade dilemmas of the year: Should investors take advantage of the tarnished loonie by selling their shining U.S.-dollar-denominated assets?Canadian dollarTrips south have become more expensive. Imported stuff that is priced in U.S. dollars is getting pricier too.
is up just 1.7 per cent this year, but it has delivered a superior 9.2 per cent return in Canadian-dollar terms.Currency moves are notoriously difficult for investors to get right, especially over the short term. And one-cent moves, here and there, probably aren’t enough to make much difference to the value of a typical retail investor’s portfolio, especially after currency conversion costs are factored in.
. The central bank has cut its key rate five times since June, as inflation and economic activity subside and the unemployment rate creeps up., creating a wide difference between the two rates. Higher U.S. rates encourage investors to move into the greenback, driving up its value relative to the Canadian dollar.
and an agenda that is designed to stimulate the U.S. economy. If the Canadian economy remains weak, and the Bank of Canada is pushed to cut its key rate more aggressively than the Fed, the loonie would likely fall even further.
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