| Legend11 said: I'm wondering if I should convert my Canadian money into American, but with my luck the Canadian dollar would then rise to 1.20 or more U.S... |
I really wouldn't touch the American Dollar if I was you ...
The American Dollar is the #1 Foreign Reserve currency in the world accounting for (roughly) 66% of all Foreign Reserves; this means that there is more than $4 Trillion sitting in central banks around the world; the reason for this is varied but some countries are trying to keep their currency's value low (China) and others simply have built up a large reserve from keeping their currency pegged (Saudi Arabia). There is a certain risk associated with the American Dollar that central banks around the world may choose to lower their foreign reserves of American Dollars in favour of another currency (potentially the Euro) or that pegged currencies would be forced to float.
Even a small (5% to 10%) shift in foreign holdings of American dollars towards other currencies could cause a snowball effect which would either cause a devaluation of the American Dollar at a rapid rate or force the Fed to raise interest rates to a punishingly high level; essentially give the fed the choice of bad inflation or bad deflation.
This is certainly not what I expect to happen, but it is an unacceptable risk at the moment; over the next 2 months the future will become clearer ... If statistics come out for the American economy that indicate a slow down and the fed either lowers rates or hints that they're going to lower rates I would (personally) be very (VERY) afraid if I owned anything valued in American Dollars.
