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Now that CAD is moving past 0.91USD is anyone considering a USD purchase? I've had a USD savings account with RBC for a while at zero balance and with parity looming I was wondering if it might be time to consider moving some of my savings to USD. I realize the USD is weak and may weaken further but the Canadian dollar has typically lived in its shadow and our export economy is dependent on this arrangement. What would be the best way to do this? Buy a little at a time? Wait for parity etc?? More generally, what % of my savings should be CAD/USD, if any? (I eat/live get paid in CAD by the way). Thoughts?
 

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Now that CAD is moving past 0.91USD is anyone considering a USD purchase? I've had a USD savings account with RBC for a while at zero balance and with parity looming I was wondering if it might be time to consider moving some of my savings to USD. I realize the USD is weak and may weaken further but the Canadian dollar has typically lived in its shadow and our export economy is dependent on this arrangement. What would be the best way to do this? Buy a little at a time? Wait for parity etc?? More generally, what % of my savings should be CAD/USD, if any? (I eat/live get paid in CAD by the way). Thoughts?
I also think that right now the Canadian dollar is overvalued, but I don't play the currency game myself.
 

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Yeah. We maintain some US savings (we lived there for a long time and visit/purchase there fairly regularly) and have definitely been watching carefully as to when to sock some more in there. I think we'll pull the trigger very soon.
 

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I don't think the US dollar is undervalued yet. The recent depreciation in the US dollar has mostly been caused by portfolio investors reallocating away from US government treasury instruments to riskier private sector investments, particularly abroad. I think it might continue for a bit. America's current account deficit, although reduced to about -3.2% of GDP from the -6-8% range of recent memory, still suggests that America continues to import more than it exports, and continues the pressure for the US dollar to depreciate. If we see the outlook for the world economy improve and oil prices increase, I would expect further deterioration in the US dollar.

From a purely psychological perspective, I'm more inclined to think that the the Canadian dollar might be overvalued if it gets into the 0.95-1.00 range. From a technical perspective though, the US dollar is in a clear downtrend. I think it would be unwise to speculate on where the floor is.
 

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Usd/cad

Disclaimer: I work for a forex company.

There are many causes to currency valuations. The most important are:

1. supply of money (monetary inflation)
2. demand of money
3. speculation

Supply of money is quite literally how much the country's reserve bank creates. Theoretically, if they were to double the money supply it would eventually cause everything priced in that currency to cost twice as much and for it to be worth half as much against all other currencies (if the others keep their supplies stable).

If there is a demand for money that outstrips supply, obviously that will increase the value of it.

Speculation increases/decreases the demand for this money in a short timeframe.

If you see a graph of the USD/CAD over the last year, you'll see that there was a huge increase in the value of USD as people, freaking out over the economy, rushed to buy US treasuries, creating a demand for the dollar. Now that the worst seems to be over, people are moving their money out again. At the same time, due to quantitive easing and the large deficits of the US government, the fed is expanding the money supply by a large amount. Canada has done almost no QE and has a relatively small deficit. Also, commodity prices have increased, creating a demand for CAD.

Now I can't say what the USD/CAD is going to do in the future as it depends way to much on what both our governments do. If things keep going like they are, you'll eventually see a greatly devalued USD. Remember that the US federal reserve can just as easily stop creating money and even destroy it if things get out of hand.
 
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