by Stacy Francis, CFP®, CDFA
Walking from my office to my favorite lunch spot today, I heard four different languages spoken. The cameras, backpacks and maps made it difficult to take the people for immigrants – rather, I gather they were a few out of the countless individuals making pilgrimages to the US to take advantage of the frail dollar.
For many of us, this weakness is a major nuisance. Foreign travel is getting more expensive by the day, not to talk about imported groceries, cars, and electronics. So I wanted to make you aware of a few ways that you can use currency fluctuations to your advantage.
The first one is when you go on vacation. When the dollar is strong (think six or seven years ago), you can live like a queen pretty much wherever you go. Today, you need to get more creative. Looking at charts, I learned that only the Zimbabwean dollar has significantly underperformed the US dollar this year – hardly your dream vacation destination. Fortunately, plenty of countries are still fairly reasonable. Instead of France or Spain, next time consider Dominican Republic, or Sri Lanka, or Thailand. You will get much better value for your money.
Another way you can make money off currency fluctuations is by investing in foreign countries. If you are convinced that the Yen has nowhere to go but up, buy a fund focused in Japan. Even if the stocks remain flat, when the dollar falls, you make money. Plenty of people have expanded their capital over the past couple of years by putting their money to work no further away than Canada. When the exchange rate went from US $0.69 per Canadian dollar to a scenario where the Canadian dollar is actually worth more than its American counterpart, they were some happy campers.