Advantages of Exchanging Canadian dollar to USD

There are several reasons why someone would be interested in exchanging Canadian dollars to USD. Some of these reasons include tuition payments, bill payments, transfers to family, or even personal shopping. Sometimes these transactions can be done in Canadian dollars, however, for the most part, when making purchases in the US it is obviously necessary to pay in US dollars. So it can be said that the main advantages of exchanging Canadian dollar to USD is to able to more efficiently make transactions and payments in the US.

However, there are some other advantages of exchanging Canadian dollars to USD to think about.

Diversification

By setting up a US dollar denominated account, you can start to make CAD to USD exchanges quickly and efficiently. Another advantage of making such an exchange is to diversify your currency holdings. Foreign exchange markets are very efficient and rarely are there large price swings; however, over time there are trends that can make currencies more or less valuable.

Take for instance the Canadian dollar which only a few years ago was trading at parity with the US dollar. Today, the Canadian dollar is far from this level of parity and is trading quite cheaply. If you chose to exchange Canadian dollars to US dollars when they were trading at parity, you would have made upwards of 20 cents on each dollar as of today.

On a transaction of $50,000 CAD your money today would be worth $60,000 USD relative to the Canadian dollar for simply waiting and holding. On the other end, if you held on to $50,000 CAD your money would only be worth $40,000 CAD today relative to the US dollar.

If you held an even balance of each, the gains and losses would cancel each other out and today you would be just as well off as when you started. As you can see, diversifying your currency holdings can have many benefits. This also applies to small and medium sized businesses that have sales across the border.

A Truly Global Currency

Another advantage of exchanging Canadian dollars to US dollars is how the US dollar is viewed and used globally. The US dollar, for quite some time now, has been widely circulated around the globe and is used as the primary denomination in many countries around the globe.

You may have noticed this when travelling to the Caribbean or other southern nations. If you are a frequent traveller to destinations that use US dollars it is always a good idea to have some deposited in an account for use. Because the US dollar is used globally in many different economies, it is also seen as one of the safest and most secure currencies in the world.

As the world’s reserve currency, you can have confidence and trust that the value of your dollars will not erode quickly as it may in some countries that have threats of high inflation such as Ukraine which recently saw its currency drop drastically in value due to political instability.

If any of these reasons interest you enough to consider an exchange, consider avoiding big banks and using a trusted independent non-bank foreign exchange provider. Big banks charge large hidden mark-ups that you can avoid easily by spending a little time to find a credible independent foreign exchange provider.