Any financial gurus around here?

[Mudcat]

. . . specifically in the area of currency conversion.

It's probably a crazy question but I am a Canadian with a fair stash of US dollars. Every morning I get up and check the conversion rates, and my holdings have become less valuable - without me doing anything. "Every morning" is an exaggeration but I'd have a good 15% more Canadian cashola if levels were back where they were 2 years ago.

Are there reliable weekly/monthly patterns to this stuff? Is the US dollar likely to pick up?

I get the feeling this is the kind of question where you could line up 5 expert and they'd all authoritatively say things completely different from each other but I thought I'd ask.

[David]

The US dollar will likely continue to weaken long-term given the huge debt and trade defecit in the US.

[tacomax]

Are there reliable weekly/monthly patterns to this stuff?

No there isn't.

The exchange rate you'll find now is pretty much the same as the long-term (12 month) exchange rate (aside from taking into a number of factors). So basically, the market expects (based on all currently available information) the exchange rate today to be the same as in a years time. However, the "available information" changes every hour of the day which results in continual exchange rate swings and this information is made up of thousands of different variables.

Or, put it another way, if you could be so sure about how the exchange rate will be moving in the next X months then you'd be a lot better playing the market than betting on baseball.

[tacomax]

The US dollar will likely continue to weaken long-term given the huge debt and trade defecit in the US.

If a certain level of debt and trade defecit is already built into the current exchange rate (which it will be) then as long as the debt/defecit follows that specific path then it will have no effect on the exchange rate. Should the long term patterns prove to be worse (or better) than those projections then the exchange rate will then move upwards r downwards, ceribus paribus.

Maybe David knows something which the market doesn't know.

[natrass]

ceribus paribus.

Thats this new Brazillian hotshot midfielder, right?

[Ganchrow]

The exchange rate you'll find now is pretty much the same as the long-term (12 month) exchange rate (aside from taking into a number of factors). So basically, the market expects (based on all currently available information) the exchange rate today to be the same as in a years time. However, the "available information" changes every hour of the day which results in continual exchange rate swings and this information is made up of thousands of different variables.

Or, put it another way, if you could be so sure about how the exchange rate will be moving in the next X months then you'd be a lot better playing the market than betting on baseball.

I agree. Attempting to outguess the market when it comes to exchange rate fluctuations is little more than a fool's
errand.

However, if you'll allow me to wax academic for a moment, macroeconomic theory predicts (and actual financial data bears out) that there should be many predictable currency fluctuations. (The catch is that it's not really possible for anyone other than an interest rate arbitrageur to take advantage of these expected and gradual rate changes.)

Think, for example, about the impact of differing inflation rates across economies. If the United States and the UK had, let's say, real interest rates of zero, and inflation rates of 0% and 100% respectively, then ceteris paribus we would fully expect sterling to depreciate at a known rate with the passage of time. If the current exchange rate were let's say 2 US dollars per pound, then in a year's time we would expect the exchange rate to have halved (each pound would be half as valuable). But as I said there's no real way to take advantage of this. If you hold pounds and use them to purchase British government bonds then the decrease in the value of your pounds in relation to the dollar would be offset by the nominal interest rate (equal, in the case of zero real interest, to the inflation rate) paid to you on your bonds.

In other words, if your investment plan consisted solely of storing your money under your mattress, you'd be better converting all your dollars to pounds immediately. If you keep your money in a bank, however, then in theory the added benefit to holding the nondepreciating asset (US dollars in this make-believe example) would be exactly offset by the additional interest you'd receive.

But as I said, this is really just an academic point.

[natrass]

I agree. Attempting to outguess the market when it comes to exchange rate fluctuations is little more than a fool's
errand.

Im sure a certain bulti-bulti billionaire called Mr Koshogi would disgree.

[natrass]

ceteris paribus

I see your a fan too. You know he pulled a hamstring last night?

[Ganchrow]

I agree. Attempting to outguess the market when it comes to exchange rate fluctuations is little more than a fool's errand.

Im sure a certain bulti-bulti billionaire called Mr Koshogi would disgree.

I probably should have qualified "is little more than a fool's errand" with "for all but the most sophisticated of quantitative hedge funds".

Even then, it would still be a debatable point.

[Ganchrow]

I see your a fan too. You know he pulled a hamstring last night?

I do. I'll be praying for him.

[Mudcat]

I agree. Attempting to outguess the market when it comes to exchange rate fluctuations is little more than a fool's
errand.

However, if you'll allow me to wax academic for a moment, macroeconomic theory predicts (and actual financial data bears out) that there should be many predictable currency fluctuations. (The catch is that it's not really possible for anyone other than an interest rate arbitrageur to take advantage of these expected and gradual rate changes.)

Think, for example, about the impact of differing inflation rates across economies. If the United States and the UK had, let's say, real interest rates of zero, and inflation rates of 0% and 100% respectively, then ceteris paribus we would fully expect sterling to depreciate at a known rate with the passage of time. If the current exchange rate were let's say 2 US dollars per pound, then in a year's time we would expect the exchange rate to have halved (each pound would be half as valuable). But as I said there's no real way to take advantage of this. If you hold pounds and use them to purchase British government bonds then the decrease in the value of your pounds in relation to the dollar would be offset by the nominal interest rate (equal, in the case of zero real interest, to the inflation rate) paid to you on your bonds.

In other words, if your investment plan consisted solely of storing your money under your mattress, you'd be better converting all your dollars to pounds immediately. If you keep your money in a bank, however, then in theory the added benefit to holding the nondepreciating asset (US dollars in this make-believe example) would be exactly offset by the additional interest you'd receive.

But as I said, this is really just an academic point.

When I read this, I feel as clueless as Ralph Wiggum and I want to say something like, "My cat's breath smells like cat food."

[Ganchrow]

When I read this, I feel as clueless as Ralph Wiggum and I want to say something like, "My cat's breath smells like cat food."

What Taco said was right on point, I was really just making a technical argument.

[aggie]

lol ganchrow, you're too good for this forum.

[natrass]

He's the man.

[SBR_John]

When I read this, I feel as clueless as Ralph Wiggum and I want to say something like, "My cat's breath smells like cat food."

HAHA!!! Now that's funny.

I never understood the relationship of different interest rates. I always thought it was a supply/demand scenario tied to trade. That was a heck of an explanation Ganchrow!

[Mudcat]

I tell ya though, it can drive you nuts. Today I check the rate and a US dollar is worth 1.157 CDN. Three days ago it was 2 cents more than that. That's almost 2 percent of my bankroll gone with the wind.

It will drive me batty if I think about it too much.

:frustrate