Buying CurrencyShares Canadian Dollar ETF as Loonie Falls Below Dollar 5 comments
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CurrencyShares Canadian Dollar Trust (FXC) is a convenient vehicle (for those of us in the U.S.) for holding funds and collecting interest on them in Canadian dollars. It is far more convenient and less expensive (for reasonably small amounts) than the alternative of converting the funds, depositing them at a Canadian bank and then withdrawing and converting them back into U.S. dollars.
Yesterday was an interesting day in the markets as many commodities and related companies' stocks took a bigger tumble than the market as a whole. Canada is a resource rich country with many of the world's largest commodity companies calling it home. The selloff in this segment was in big part responsible for a lowering of demand in Canadian dollars, which pushed the Loonie's exchange rate back below U.S. dollar parity.
I saw this move as temporary and used the opportunity to diversify away from the falling (and perhaps failing) U.S. dollar, picking up FXC at $98.98/share.
Disclosure: Long FXC
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This article has 5 comments:
The US dollar fluctuates through a 10 to 15 year cycle. Extreme collapse scenarios aside for those outside the US starting to buy into US based ETFs with a 5+ year horizon could end very well.
In either case, price inflation will migrate from the wholesale level to the retail level on a much bigger scale. This will not translate into wage inflation, and the consumer will get squeezed 'till it really hurts.
This will cause a bigger than ever anticipated default rate by consumers on credit cards, which will cause a major market decline across the board (30%+ is quite possible). I think various actions by the Congress and the Fed could delay this past year end, but I do not think that anything that they do (perhaps, short of switching from a market economy to a planned economy) can avoid it in 2009.
But that's just my crystal ball...