Currency Watching

Welcome to my new hobby -- watching the Canadian dollar rise and fall and rise and fall and rise and fall again. When I arrived in Brazil last autumn, the Canadian dollar was worth close to R$2.30 -- an exchange rate which meant that I got to divide the price of everything in half and then take off even a little bit more. It was great! Well, at least for the foreigners, it was. In the spring, the dollar fell to a low of R$1.85 and since then has been fluctuating between R$1.85 and R$1.95.

My lack of movement on the car-buying front is intrinsically related to my currency watching. My choice of cars has been narrowed down to two options, one of which would cost CAN$5,000 more than the other, but would have a better resale value in two years time. Various factors are at play when it comes to my currency-watching for car-buying purposes:

1. What will happen in Canadian politics and economics? The dollar dropped dramatically in the spring when the minority government almost fell during a budget-related confidence vote. With renewed calls from the opposition for a fall election and the upcoming conclusion of the Gomery Commission, things do not necessarily look good for the loonie. Or maybe a little stability will help improve her rating....

2. What will happen in Brazilian politics and economics? Not to be outdone with the Canadian side of the equation, the Brazilian government is also currently embroiled in their own scandals involving alleged payments to opposition party members to vote on government-proposed bills and legislation. What effect will this, as well as next year's upcoming federal election, have on the real? Will the economy still be strong in two years time when I come to sell my car? Last time there was a federal election, in 2002, the real plummeted.

3. What will happen in American politics and economics? Well, we're all related whether we like it or not, aren't we? No but seriously, the US dollar is about the only currency against which the Canadian dollar is managing to hold its own. I can't even speculate on where this one is going....

So the questions remain: Do I buy now while the dollar is weak only to have to sell later once the dollar has rebounded, thus losing more than just the devaluation? Do I hold out and try to buy when/if the dollar gets stronger, risking the fact that it might fall even further [in 1999, the Canadian dollar was worth R$1.29]? and finally, Do I buy the more expensive car in the hopes that the Brazilian economy will still be able to absorb its resale in a few years time, but again risking a bigger loss than with the less expensive car? I suspect that the answer is: Just suck it up and buy the car. Forget the currency watching 'cause it will just drive you crazy.

This is why I am not a currency trader.