With the increasing strength of the Canadian dollar and the continual weakening of the USD, it's only a matter of time before we reach parity.  With the Canadian interest rates holding steady and with the US feds expected to start a cycle of reducing interest rates, we should see the CAD/USD @ close to 1:1 soon.  Some analyst say before the end of the year.  As of today, the exchange is $1.027 or $0.97.

However, nothing is ever certain with interest rates, but hypothetically speaking, how can the typical Canadian take advantage of the cheap USD?

1. Cheaper travel to the US. 

  • This is a great opportunity to bring the kids to Disney world, or to take a cruise at a bargain price. 

2. You get to purchase quality USD stocks within your RRSP at a low forex rate.

  • Remember, when you buy/sell USD stocks within your RRSP, you are faced with forex fees in every transaction (buy AND sell).  This is because the brokerages do not allow USD within your RRSP account (a pet peeve of mine).

3. Cheaper to purchase items on eBay which are listed in USD (like most items are).

  • For me personally, I like to shop around for deals on eBay, so this is a great opportunity to purchase items @ a discount.  I remember buying stuff on eBay when the exchange was around $1.5 and I still found deals then!

So, back to you, how will you take advantage of the low exchange rates? 

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  1. wc on September 18, 2007 at 10:00 am

    The Fed is making their interest rate announcement today. Could see some more action on the exchange rate.

    Generally, many Canadian exporters and manufacturers dislike having such a strong dollar. a strong CAD does remove our ‘easy’ competitiveness. I think it is a great time to look at how effective we run our businesses. As Warren Buffett points out, high cost operations seem to continually pump money into their system whereas low cost operations are always looking to be more competitive.

  2. FrugalTrader on September 18, 2007 at 10:05 am

    I would say the exchange rate has already factored in the expected 0.25% cut today by the feds. However, any further cuts will drive the exchange closer to parity, especially if Dodge raises rates sometime this year.

  3. What the heck is a FOREX? | the Wealthy Canadian on September 18, 2007 at 10:33 am

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  4. nobleea on September 18, 2007 at 1:11 pm

    I know of someone who managed to get a USD LOC from a canadian bank, which he used to buy his house. This was about 3 years ago. He knew that the USD was going to go down and now the F/X rate has chopped a massive amount of his mortgage off, when priced in CAD$ (he and the house are in Canada).

  5. Gates VP on September 18, 2007 at 1:56 pm

    Wow, nobleaa, that’s a great move! Here’s hoping that he has a buyout clause so that he can realize the profits from his great move in the next few years.

    BTW FT, I think the ebay thing is a great idea for the early x-mas shoppers! I used to buy on e-bay @1.5x as well. However, back then, e-bay had significantly less overhead. E-bay has saddled the sellers with more and more fees over the past few years, so it can be tough to find the right deals.

    However, we’re still paying more for goods typically priced in USD (notice how printed book prices aren’t following the exchange rate?), the number I read was about 15% more (post-exchange), so there’s definitely room to save a few percent even after shipping and exchange.

  6. colin on September 18, 2007 at 2:41 pm

    Buy a car in the US and import it, the procedures are fairly simple. Not all makes and models offer a price advantage, and not all automakers warrant their vehicles cross border.

    Do the homework and import.

  7. Telly on September 18, 2007 at 2:48 pm

    nobleea, that is a pretty ballsy move by your friend. I would never ride my mortgage on forex and mine is fairly small!

  8. nancy (aka money coach) on September 19, 2007 at 2:35 am

    colin – if you have good intel on buying a car, let us know… I’ve been trying to buy one from Seattle/Bellingham, but the Toyota dealers are forbidden by Toyota to sell to Canadians!! Does anyone know if this contravenes NAFTA, or can individual companies set their own policies?

  9. Telly on September 19, 2007 at 12:03 pm

    nancy, this is just hearsay but I have heard that some dealerships in Detroit are offering deals to Canadians and included in the offer is to take care of all the required paperwork for them. I can’t verify this though.

    There’s a thread on the Canadian Business forum that discusses the details of buying a car in the US (including people that have done so). Hopefully you’ll be able to find the info you’re looking for here:


  10. nobleea on September 19, 2007 at 12:22 pm

    A guy at work recently bought a toyota tundra from a dealer in the states (arizona i think). The dealership paid for one way flight for him and his wife to pick it up, plus the gst, did all the paperwork.. and it was still a huge savings.

    Some dealers will say that warranties are not valid in Canada, but that is a lie. Several lawsuits have shown this. If an american drove their car to canada for a visit and it brokedown, warranty would still be valid. Vice versa for a Canadian.

  11. Gates VP on September 19, 2007 at 2:33 pm

    Hey Nancy, the case you’re talking about is most likely in violation of NAFTA, but they probably don’t know or care. I’m sure that we all remember the softwood lumber debacle? *shrug*

    As I said, we’re still paying more for goods priced in USD. The companies benefiting just want to extract as much money as they can while the going is still good. If Canadian new car prices don’t drop next by next spring, watch this cross-border trade become a big deal :)

  12. Wiigal on September 19, 2007 at 2:35 pm


    Regarding your comment about buying US stocks cheaper with the new exchange rate being close to par. Yes the foreign exchange will be less, i.e. 1.02 but when the US dollar keeps falling say to par or even lower, then even if my US stock made a little money, I’d still lose out from the falling US dollar.

  13. FrugalTrader on September 19, 2007 at 3:55 pm

    Hey Wiigal,

    Yes, you are right, there could be more downside. But historically speaking, we are outside the norm in terms of forex.

  14. nobleea on September 19, 2007 at 5:20 pm


    “But historically speaking, we are outside the norm in terms of forex.”

    This is true. The US is also outside the norm in terms of government deficits. In fact the whole country is essentially running a deficit (see the negative savings rate).
    As long as they continue spending more than they earn, more debt will have to be created (essentially printing new money). The more money that is printed, the more the USD will depreciate against other currencies.
    I would not buy USD stocks and I try to stay away from a large exposure to mutual funds with large US content (selecting International funds instead of Global for example).

  15. Telly on September 19, 2007 at 5:58 pm

    Do Canadians have a widely different savings rate than our US counterparts? I don’t think so. The current US savings rate (~0) is after tax. Since the majority of US workers have a 401k plan, which they contribute in PRE-tax dollars (posted savings rates are after tax), it seems to me our 1.6% savings rate isn’t substantially better considering many more Canadians contribute to RRSPs after tax.

    I don’t think we’re far off.

  16. nobleea on September 19, 2007 at 6:08 pm

    Telly, you’re right. Canadian consumers are not that far off. I do believe RRSPs are a little more popular in Canada than the 401k’s are in the US (RRSP contributions are also pre-tax dollars).

    But it’s not the consumer that’s responsible for printing money and new debt. Canada’s govt has been running surpluses for a while now, which means we don’t have to print new money to pay off deficits. This is one of the reasons why the CAD$ has appreciated against the US$.

  17. Gates VP on September 19, 2007 at 6:42 pm

    Hey Telly / nobleaa:

    I just kind of a ranting / post about this stuff. But from the numbers I’ve seen, nobleaa has it right, we’re not saving any more, but we are spending less as a country.

    The other factor here too, is the ability to pay down the debts. We Canadians are pretty blessed, b/c we actually have “stuff” we can use to pay off the debts. We have “extra” land and “extra” resources, people with CDN$ can be pretty confident that they can “cash them in for something useful”.

    The biggest problem in the US is that they don’t. They don’t have lots of “extra” land or “extra” resources. They can’t even generate enough energy to keep themselves going. What’s more, is that foreigners holding USD have kind of noticed that they can’t really “cash in” for anything b/c the USD (as of a few years ago) was too valuable.

    Right now, as I see it, the USD will continue its decline b/c it’s just not “valuable” in the sense that you can convert your dollars to “stuff that you want” on an international scale.

    (of course, I could be wrong, it happens pretty regularly :) )

  18. telly on September 19, 2007 at 10:17 pm


    I agree with you with respect to national debt, it’s quite obvious the US has big issues right now and we are in a much better situation.

    However on the retirement savings front, 401ks are actually more popular than RRSPs. In 2005 less than 40% of Canadians (aged 25-64) contributed to an RRSP while in 1999 (I can’t find more recent #’s and I would assume they are up since then), 75% of Americans contributed to a 401k if it was available to them. Many of them may have contributed to IRAs as well. I’m not surprised by this. I work in the US (live in Canada) and I know many people that work / live in the US that max out their 401k contributions AND contribute to an IRA. I don’t know a single Canadian that does (though I’ve met some online ;)). One of my former co-workers was in pretty serious debt but she would not dream of suspending her 401k contributions (even when employer matches were suspended). I’m not saying it’s the right thing to do but the truth is, 401ks are VERY popular in the US.

    GatesVP, if the US goes to into a recession, it’s unlikely that we won’t be affected just because we have “land and resources”. The US is still the World’s strongest economy because a country’s economy is not dictated by consumer & government spending alone (thankfully!). George Bush is a total moron. The US will be glad when he’s gone and imo, the USD will become stronger than the CAD once again.

    One last note, if we have so much land, why is the average price of a home in Canada >$300k while it’s only ~$200k in the US? As I said, seems we have our own problems that may not have surfaced yet.

  19. Cannon_fodder on September 19, 2007 at 10:40 pm

    Any opinions on how much the rise in our dollar vs. the US is because of our fiscal prudence compared to the US (which I guess the War on Terror has plaid a major role) and the other impact on high commodity prices (oil, gold, wheat, etc.) with which Canada is blessed?

    In other words, let’s say that a new adminstration is elected into the White House and they get tough on the deficit – would we expect to see by 2010 a 90 cent CDN dollar? 85 cents? Or is the big impact going to be when oil comes back down to $60 levels, wheat producers elsewhere don’t suffer from drought, and inflation hedging gold starts dropping to the $500 level because the downturn in the US housing market starts affecting the general economy?

  20. Cannon_fodder on September 19, 2007 at 11:17 pm

    Plaid??? Don’t mean to skirt the issue, but how did I manage to type plaid when it should have been played? Maybe I should have hemmed and hawed before hitting the submit button.

  21. nobleea on September 19, 2007 at 11:45 pm


    I’m not trying to start a debate here, just want to point out some things.

    “75% of Americans contributed to a 401k if it was available to them”

    What percentage ARE offered 401k’s? If I recall correctly, 401k limits are lower than rrsp limits in Canada. Though it doens’t matter as few people reach the limit anyways.

    Cannon_fodder, I don’t know what % the rise in our dollar is reflected by oil prices. I’m sure you could plot out the price of oil, gold, wheat, etc versus the amount a CAD$ buys in US and see the trends.

    F/X rates are also driven by interest rates. The fed dropped their prime rate which makes investing there less attractive. When/if the bank of CAD raises rates here, the CAD$ will get another boost.

    If a new administration got tough on the deficit, it’s tough to say what would happen. Long term, it would be good for the greenback. Short term, it would be disastrous. They’d have to do so by increasing taxes which would cut consumer spending. Then they’d have to lower interest rates again to try and jump start consumer spending. To think this would be tried while the housing sector is correcting – that would be a recipe for disaster.

    China has massive amounts of US debt. They are one of the banks on the US negative ammortization mortgage. If their treasurer were to ever say ‘we’re going to diversify our holdings out of the US$’ that would singlehandedly torpedo the greenback.

  22. Telly on September 20, 2007 at 10:39 am


    A little debate doesn’t hurt and actually, for the most part, I agree with most of your points but I wanted to say a few things about the 401k and US savings rates.

    I don’t know how many Americans are offered 401ks but I do know that Americans have more options for retirement plans than we do in Canada (IRAs, Roth IRAs). Most salaried employees are offered 401ks and self-employed individuals have other options as well.

    You’re right that 401k limits are lower than RRSP limits. The 401k limit for 2007 is $15,500. The RRSP limit is $19k or 18%. Individual companies limit 401ks as they choose but most have limits >20% of salary. At my company, it’s 35% so unless someone is making more than $86k, maxing out would generally mean more savings in a 401k plan than in a RRSP. Also, 401k limits are not deducted by pension amounts. I’m not trying to make Americans out to be the greatest savers on Earth (we pretty much know that to be false) but I’m learning that they seem to be better about using their retirement savings plans than we are and that if those numbers are excluded from the adevertised “savings rate”, there should be an asterisk because they seem to do a pretty good job.

    The other factor is that the highest tax bracket in the US is 35% (for incomes over $339k!) and 401k contributions are not deducted from State income taxes. Considering the tax savings we get (up to 48%), we have much more incentive to invest in a registered account than Americans do.

    Ok, excuse me while I go make an RRSP contribution. ;)

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  25. Ed Rempel on September 30, 2007 at 8:03 pm

    Hi All,

    Have you ever seen how the Personal Savings Rate is calculated? It’s ridiculous!

    First, it is based on macro data that is often not very accurate and it is a residual – personal disposal income after tax less personal consumption expenditures.

    Then income excludes all pension income. Why?

    Then it also excludes all capital gains – on investments and real estate. Americans do the vast majority of their saving through capital gains.

    Then the expenditures include “owner-occupied nonfarm dwellings space rent” – which is a fictitious number that estimates how much rent all homeowners would pay if they rented their homes instead of owning them. This number increased expenditues by $963 billion in 2005!

    While Americans personal savings rates have been negative, their net worth has been rising fast. Based on the Commerce Department calculation, Bill Gates has saved almost nothing – since it excludes all the gain on Microsoft shares!

    I think the number is misleading and meaningless. If you include capital gains, my guess is that American personal savings rates are the highest or one of the highest in the world.

    The stat is meaningless anyway. For the last 20 years, Japan has had very high personal savings rates, but their economy has been stagnant and their stock market is down over 20 years.


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