On Thursday the S&P 500 as well as the DOW set new records before closing early for tomorrow’s holiday. Toronto was about flat.
The Canadian dollar has risen to about 94 cents U.S. from lows of 89 and 90 cents earlier this year. And back in January as it went under 90 cents most analyst seemed to be suggesting it would go quite a bit lower. They were wrong.
My strategy has been to try to buy more American dollars when the Canadian dollar is higher and convert some U.S. back to Canadian as the Canadian goes lower. But is never easy to know when to do this. It probably does not make sense to be buying and selling on a 1% move in the dollar, maybe on 3% to 5% in either direction makes more sense.
Back in January as the Canadian dollars went lower and as that increased the value (in Canadian dollars) of my American investments I hedged some of the currency buy using U.S. dollars to buy a Canadian dollar fund FXC on New York. I started hedging a bit too early. Most of this year that hedge was in a loss position as the Canadian dollar was lower than where is was when I purchased my FXC (average purchase price). Right now I am thinking of selling some FXC as it has risen. But I am tempted to wait and see if the Canadian dollar goes a bit higher before I do that.
Overall, most Canadian investors probably don’t need to bother with hedging U.S. dollars. Over a long period of years hedging might not make much difference. Also most Canadians will ultimately need U.S. dollars to spend so in that sense leaving U.S. dollars un-hedged is a natural hedge against your future shopping/ vacation/ retirement spending in the U.S.