If I think the Canadian dollar is quote low, and I have a bank account in US dollars, would you suggest that I put a few thousands of CAD in that account?


1 Answer 1



Suppose you have 100 Canadian dollars and the exchange rate is 2 CAD = 1 USD. You use your 100 CAD to purchase 50 USD (in your bank account that is in USD). Some time later the Canadian dollar grows stronger, so that now 1 CAD = 1 USD. If you now withdraw your 50 USD and get Canadian dollars, you will receive 50 CAD. You have lost half your money.

If you want to make money on currency exchange rates (which is a risky plan), you should buy the currency that is cheap (i.e., "weak"). If, say, oil is very cheap, you don't make money by selling oil; you buy it and sell it later when the price goes up. Likewise, if the Canadian dollar isn't worth much and the US dollar is, you should buy Canadian dollars, not US dollars, hoping to sell them later when the exchange rate is more favorable. See also this similar question.

  • Of course, "cheap" is relative to expectations, which may be wrong. And C$ have already come up to much closer to par with US$; it's very hard to be sure whether we're now high, low, or about right and which direction things might go from here, or when. If you don't understand what drives exchange rates (I know I don't!) betting on them is probably a bad idea
    – keshlam
    May 29, 2015 at 4:05

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