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We have just purchased a retirement home in Panama. The whole thing will probably total approximately $180,000 in US funds.
As construction progresses (over the next 12-18 months) we will be making US dollar payments.

We have already given an initial deposit of US $25,000

We are not sure which of the following strategies to use:

1) Watch the Canadian dollar carefully and when/if it goes above a dollar US withdraw the remaining $150,000 + from our Manulife account and transfer to our Scotiabank US account, thereby saving us from any currency fluctuation hits. Of course, from that moment we will begin to incur The Manulife One interest charges of 3.25 for 12-18 months.

2) Pay the various deposits as construction progresses at whatever the US-Cdn exchange rate is at the time, but of course having lower interest charges on our Manulife margin over the 12 - 18 month construction timeline.

Thanks to your B&B for helping to resolve our dilemma:)
 

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OP, you are asking if you should time the exchange rate at the expense of higher interest rates because you borrowed more sooner. Therefore I suggest you likely go with option 2) since timing anything can go either way unless you are a something really special, which most of us are not when it comes to timing markets or exchange rates (no offense intended).
 

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You understood my question perfectly. I will seriously consider your suggestion of going with option 2.
 

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I am an aggressive investor. When the Canadian dollar reaches the low 90's I would short the Horizons BetaPro 2x inverse leveraged US Dollar Bull. Typically because of the small decay due to the fact they are double leveraged, you don't want to hold them for longer periods of time. But, if you think the US dollar will get weaker against the Canadian dollar you might think you would buy the inverse, or the Bear. Ifninstead you short the Bull you will actually make decay work for you.

As the months go by you can actually find that the decay can make you money even if you guess wrong. If you go to Horizons website you will see that the perfomance of the leveraged pairs do not equal the inverse (eg. if one is up 13.5% the other is not down 13.5%). What you will see is that the longer the performance period the greater likelihood that both the Bull and Bear are negative.

Thus, if you short the ETF and have at least a year, you can see a net positive to your investment.

But, I am aggressive and that may not be a comfortable strategy for you.

Regardless, I would be very interested in your decision to buy in Panama. My wife and I are considering moving to South America to retire. This is because we can retire sooner, and cheaper and, with some exceptions, better hopefully.
 

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If you were a company doing this with millions of dollars, the risk-minimizing solution would be to figure out when you will need how many US$ and then enter into USD/CAD forward contracts to lock in your rates at the time you need them. The transaction costs on doing this as an individual for these types of dollar figures are probably prohibitive, but looking up the forward curve is the best unbiased predictor of what the market expects rates to be. Then you could see whether you are most likely to be gaining or losing money by converting it all now and paying manulife one interest versus converting as you go along at the "most likely rate" at each point - that what the forward curve is at now.

As I wrote this, I thought I would look up the forward curve online and post a link. Unfortunately, I can't find one! When I need forward curves at work, I get someone to pull them from a Bloomberg terminal, but the free sources I see online are all focused on day traders/currency speculators trying to arbitrage spreads and don't just give the curve. Anyone a better searcher than me?

The other question is one of risk tolerance. Suppose once you do the above analysis you figure out converting as pmts come do is likely - given the average market prediction - to come out slightly ahead. What will you say if currency trends actually go unfavorable to you and your choice actually costs you an extra $10k? Will you shrug your shoulders and say "too bad, another one of my bets will make money", or will your ability to move in happily be impaired?
 

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Discussion Starter #9
Regardless, I would be very interested in your decision to buy in Panama. My wife and I are considering moving to South America to retire. This is because we can retire sooner, and cheaper and, with some exceptions, better hopefully.
Please check your PM's I sent you more info about our Canadian Panama Townhouse we are having built.
 
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