The US Dollar has had a great year. From the 80 level during 2014 up to almost 100 now, it’s had a great run.
The 100 level was last observed back in 2003, and only a few times going back to President Nixon’s breaking-the-link-with-gold episode in the early 1970s.
How is this possible?
The economy is, it would appear, in a shambles. The number of Americans not working is at a record high.
Even worse, interest rates are at record lows. Conventional wisdom is that investors put their money where it can earn the greatest return. The fact that the US Dollar is increasing proves that investors are putting their money in the US, but it can’t be in search of great interest rates, can it?
Sort of.
The American economy ain’t pretty, and interest rates are low, but compared to everyone else, they are doing great. It’s all relative. They are the least ugly pig.
Low interest rates explain the strength in American stock markets. The markets are not quite back to record highs, so a crash around the 27th of April remains a possibility, but with low interest rates world-wide, where can you put your money? In the NYSE, and the Nasdaq, both of which are denominated in US Dollars. If you want to invest in US markets, you need US dollars, and that’s driving up the currency.
So Americans keep their money in the US (no point in putting their money in another currency that is depreciating), and most everyone else does the same. Up go the markets.
Will this continue?
Not forever; nothing does. It may not even continue in the medium term. But for the next month, or two, or three, there is nothing to suggest that the US dollar will turn down relative to other currencies. So the strategy is simple:
If you are American, keep all of your investments denominated in US dollars.
If you are not, do the same.
As a Canadian, I have specifically transferred a significant portion of my portfolio into US dollars.
I have an RRSP, and I now have a Canadian dollar and US dollar account. It only takes a few computer clicks to transfer funds from one to the other, and that’s what I’ve done. I’m now holding US investments, so I get the “double whammy”; my investments are increasing, and I’m also making money on the currency. I currently hold Apple and TLT, and both have performed admirably. I will diversify into some other securities shortly.
I have done the same with my TFSA (tax free savings account), which is also now in US dollars.
At some point this will end, but until it does, I plan to enjoy the ride.
Thanks for reading, and have a good week.
Some Thoughts on the US Dollar
by JDH on April 11, 2015
The US Dollar has had a great year. From the 80 level during 2014 up to almost 100 now, it’s had a great run.
The 100 level was last observed back in 2003, and only a few times going back to President Nixon’s breaking-the-link-with-gold episode in the early 1970s.
How is this possible?
The economy is, it would appear, in a shambles. The number of Americans not working is at a record high.
Even worse, interest rates are at record lows. Conventional wisdom is that investors put their money where it can earn the greatest return. The fact that the US Dollar is increasing proves that investors are putting their money in the US, but it can’t be in search of great interest rates, can it?
Sort of.
The American economy ain’t pretty, and interest rates are low, but compared to everyone else, they are doing great. It’s all relative. They are the least ugly pig.
Low interest rates explain the strength in American stock markets. The markets are not quite back to record highs, so a crash around the 27th of April remains a possibility, but with low interest rates world-wide, where can you put your money? In the NYSE, and the Nasdaq, both of which are denominated in US Dollars. If you want to invest in US markets, you need US dollars, and that’s driving up the currency.
So Americans keep their money in the US (no point in putting their money in another currency that is depreciating), and most everyone else does the same. Up go the markets.
Will this continue?
Not forever; nothing does. It may not even continue in the medium term. But for the next month, or two, or three, there is nothing to suggest that the US dollar will turn down relative to other currencies. So the strategy is simple:
If you are American, keep all of your investments denominated in US dollars.
If you are not, do the same.
As a Canadian, I have specifically transferred a significant portion of my portfolio into US dollars.
I have an RRSP, and I now have a Canadian dollar and US dollar account. It only takes a few computer clicks to transfer funds from one to the other, and that’s what I’ve done. I’m now holding US investments, so I get the “double whammy”; my investments are increasing, and I’m also making money on the currency. I currently hold Apple and TLT, and both have performed admirably. I will diversify into some other securities shortly.
I have done the same with my TFSA (tax free savings account), which is also now in US dollars.
At some point this will end, but until it does, I plan to enjoy the ride.
Thanks for reading, and have a good week.