USD vs CAD GIC rates | GIC discussions | Discussion forum

Nobleinvestor said
As a Canadian...  

Since you are a long-time reader of this site, you should be aware of some extended threads here talking about Buy Canadian. As a Canadian in 2025, you should Buy Canadian no matter what, to show your support. If you really think the pasture is greener there, then follow the example of Karney's Brookfield and move yourself south.

p.s. I am not affiliated with or promoting any Canadian political parties.

Nobleinvestor said
Hi everyone,

I've been a long-time reader of this site and finally decided to register and join the conversation. I have a question for the seasoned investors here:

I've been offered a 1-year USD GIC at 4.6%, which is significantly higher than the current 1-year CAD GIC rate of 3.26%. I'm considering converting my Canadian dollars to USD to take advantage of the higher yield. However, I'm unsure whether the potential gains from the interest would be offset by currency fluctuations over the next year.

To simplify:
As a Canadian, would it be wiser to go with a 1-year USD GIC at 4.6%, or stick with a 1-year CAD GIC at 3.26%, given current exchange rates and the potential movement of the USD?

Appreciate any insights or experiences you can share—thanks in advance!  

Be aware of fee for currency exchange, CAD USD. If you exchange at a bank branch, may charge you 2% fee.
Much Lower fee if you do Norbert's Gambit.

I do not know much about economy, currency... So I always read what the economists say. Here is one:

https://ca.finance.yahoo.com/news/worst-is-over-for-the-canadian-dollar-says-desjardins-172255078.html

No one has more than a dice roll idea of what will happen to the loonie relative to foreign currencies such as the Euro and USD. The key is to be invested across geographic regions and currencies and not place big bets in either direction.

Much research has been done to suggest Canadians should be about 25-35% Canadian and the remainder ex-Canada on a market cap weighted basis. It is how I have been invested, more or less, for over 20 years. I have seen no reason to change that through any of the major crises this millennium.

Nobleinvestor said

I've been offered a 1-year USD GIC at 4.6%, which is significantly higher than the current 1-year CAD GIC rate of 3.26%. I'm considering converting my Canadian dollars to USD to take advantage of the higher yield. However, I'm unsure whether the potential gains from the interest would be offset by currency fluctuations over the next year.

To simplify:
As a Canadian, would it be wiser to go with a 1-year USD GIC at 4.6%, or stick with a 1-year CAD GIC at 3.26%, given current exchange rates and the potential movement of the USD?
…

Do you have US$ bills or liabilities that need to be paid in a year's time or are you looking to do some currency speculation?

I think a provincial government years ago did something similar in reverse. Someone in Finance realized that if one issued their provincial bonds in Japanese yen instead of Canadian dollars, the bond interest rate would be under 2% instead of the going 7% to 8% at that time. Big savings in debt servicing cost!

They went ahead and issued the bonds in Japanese yen and thought they were really smart. Unfortunately, a few years later, the Japanese yen appreciated against the Canadian dollar by something like 30% to 40%! As a Canadian province, their taxes and fees were collected in Canadian dollars and not in Japanese yen.

AltaRed said
No one has more than a dice roll idea of what will happen to the loonie relative to foreign currencies such as the Euro and USD. 

If that were true there would be no speculators in the 24/7 foreign exchange market which in 2022 had an average daily trading volume of 7.5 Trillion vs a few hundred billion for all stock markets in the world. If one does their homework it is possible to make more gains than losses.

Lodown said

AltaRed said
No one has more than a dice roll idea of what will happen to the loonie relative to foreign currencies such as the Euro and USD. 

If that were true there would be no speculators in the 24/7 foreign exchange market which in 2022 had an average daily trading volume of 7.5 Trillion vs a few hundred billion for all stock markets in the world. If one does their homework it is possible to make more gains than losses.  

There are certain patterns in currency flows resulting from investment flows and trade and specialists armed with super fast computers and codes trading 24/7 can exploit them. They gain tiny percentages on huge piles of cash. People on the other side of these trades are typically in the import/export or investment business and currency traders provide a service by providing liquidity.

I seriously doubt any amount of “homework” will help an amateur.

That said, if one has a meaningful amount of fixed income then I see nothing wrong with currency diversification. It's just that the purpose ought to be safety rather than gains.

I believe it is a smart strategy to hold some US$ whether in GICs, Investment Accounts, ETFs, Stocks, US$ Bonds. US currency is a major currency high in demand around the world, the Canadian dollar is not a high demand currency. (We are a small country - we do not have a powerhouse economy like the US - Canada about 1/10 size of the US.) I believe one will not lose money- related to exchange rate - holding US$ over time. Not from my experience anyways.

.
What others here have said about having Some of your investments 'Directly' in the USofA.

I did just that Way Back in 2013, when the CAD$ was 'At Par' with the USD$, and set up my USD$ Investment Trading Account. At the time, I'm sure several others here did as well ... it was a 'Golden Opportunity' ❗

Now look where the CAD$ is, compared to the USD$ (USD$ now = ~$1.40 CAD$). And add to that + Mega Capital Gains + a Whole Lota Dividends.

Ka-Ching ❗❗❗

Dean