I am not an economist, nor do I play one on television. I am also not terribly interested in American politics, but there’s no way to avoid following the saga about raising the debt ceiling and how the American economy could suffer. Granted, most of my perspective on the matter is coming by way of Jon Stewart and Stephen Colbert, but the current state of affairs is troubling to say the least.
And so, with that August 2nd deadline looming just over the horizon, I’m left asking whether I should convert my American money over to Canadian. With all that uncertainty, who knows where the American dollar will end up on the international money markets next week?
This certainly isn’t the first time that I’ve faced this conundrum. In fact, I’ve been facing it for the entirety of my freelance career, since I do have clients who pay me in American funds. The Canadian dollar eclipsed the American dollar four years ago, but it bounced back. Now, it looks to be heading toward a downward spiral in relation to the Canadian dollar. The mid-market rate as I write this post today is 0.9513 (1.0511 if you’re going in the other direction).
But look at that trend! The chart at the top of this page, courtesy of Yahoo! Finance, charts the USD-CAD exchange rate over the course of the last 12 months. Aside from a slight upward swing in May 2011, the trend is quite clear. With the whole debt ceiling fiasco going on, I’m not exactly optimistic in the short run either.
That said, in my heart of hearts, I’m reasonably confident that the American dollar is a good investment in the long run. It will surely bounce back again, but there’s no saying what kind of timeline we have to consider here. I do have an American bank account in US funds, as well as a PayPal account with US funds, so it is possible for me to “sit” on the American money for now. At the same time, it’s disheartening to see the relative value of that money drop steadily with each passing day.
The good news is, despite buying a new home and planning for a wedding, I don’t need access to those funds in the short term. That might change, but it still makes me uneasy about the money I have in American funds. What do you think? Would you “cash out” some US money at this point? Or stick it out for the long haul?
I believe Gary would tell you to stay with it for the long run. An investment, in something like the US government will not just disappear. But, you will need the patience to not watch it daily and let it go.
I’m sorry to hear you are caught in this somewhat unenviable situation.
In your post, you have more or less answered your own question.
As you’ve explained with the chart of the USD-CAD exchange rate, the American dollar is on a downward trend, and your pessimism isn’t uncalled for.
Whether you want to “sit” on the American money or “cash” them out depends on your holding power, and your outlook of the American economy post this debt-ceiling fiasco.
I may be wrong, but I sensed that you will hold on to your greenbacks and sit out this fiasco.
For me, i will cash out now (even if it means suffering some losses), becasue you never know when “rainy days” will hit us when we least expects it.
I’ll likely end up with some middle of the road solution where I convert *some* of my US funds, but not empty out the account. I guess you could say that I’m hedging my bets. It would be an entirely different situation if I didn’t have a healthy “rainy day fund” already available to me in Canadian dollars.
i loose a lot while conversion of the currency from $ to rupees
By the sounds of it Michael, you should hold on to your position. You really gotta play the long run game here, if history shows us anything, the Dollar will rebound in the long run. You said you have a bank account in the USA, so as long as you can bear the finances without having to do the exchange right away, I would hold the money in the usa bank for now. In the end its all about your liquidity, if you need the money your position changes completely, as I am sure you are well aware.
-Jean
i agree to that , experiences from the past , Dollar will rebound