Time to buy some U.S. bucks

The Canadian dollar has been on a real tear lately. The loonie has been climbing steadily against its American counterpart since early May.

On May 3, the Canadian dollar was worth 72.8 cents U.S. and as I write this on Sept. 7, it’s sitting at 82.5 cents.

That climb represents a gain of 13.3 per cent over four months and many are speculating on how much higher it can go.

I unfortunately don’t own a crystal ball, and nobody can say for sure, but I’m willing to state the performance of the Canadian dollar very likely won’t continue.

There are far too many headwinds against the loonie for it to keep this rally going higher.

Our distressed housing market, fluctuating oil prices, gaining momentum for the U.S. economy and the looming threat of NAFTA’s demise are only a few of the many reasons why are currency will likely falter.

Much of the loonie’s quick climb this summer was likely due to currency trader speculation.

There were many traders shorting the Canadian dollar and most of those positions were covered during that time.

Many of these same traders actually went long on the loonie for a while to capitalize on the momentum which explains how it managed to top the 89 cents U.S. mark a few times.

This play appears to be done and the currency traders are taking their profits which will push the Canadian collar back down a little more.

Canadian investors should be embracing the U.S. dollar if they haven’t done so already.

The high Canadian dolalrs gives you a unique entry point into the American market that likely won’t be repeated anytime soon.

In addition to being a promising investment opportunity, the U.S. dollars is a great diversifier, as well.

A resource-based economy like Canada’s typically does well when global growth is healthy, but can be hit hard when growth slows or global markets experience a shock.

Holding a portion of your portfolio in Greenbacks can help protect you from a major market event since the U.S. dollar is viewed as a safe-haven and will appreciate in value in troubled times.

For those of you that have currency hedges in place in your investment accounts, this might be an appropriate time to close out those hedged positions and let the currency trade back into your portfolio.

Those planning to head south of the border this winter should also take note.

Many snowbirds who spend five or six months of the year in the U.S. need a healthy amount of money each winter to finance their extended stays.

Again, there is no way to know for certain, but I would suggest now might be a good time to purchase your winter U.S bucks.

Converting some Canadian to American doesn’t mean selling investments and going to cash earlier than required.

You can easily hold many of the same investments you already have in your portfolio in a U.S. dollar version, which allows you to convert the currency now, but remain invested until the funds are required for expenses.

The U.S currency will likely always be a good diversifier for Canadian investors.

And now appears to be an excellent time to enter the American market.

Sit down with a qualified financial professional to review your own needs and situation to see what currency-related changes might make sense for you.