Q&A With Gordon Pape: Holding U.S. Cash
Where is the best place to hold American currency?
Q – You have recommended holding any cash reserves in U.S. dollars. Do you recommend any particular vehicles to hold this cash, such as money market funds, savings accounts, etc.? I could not find any listed on your USD recommended lists. – Don M.
A – Unfortunately, you aren’t going to earn much interest on U.S. cash (or on any cash for that matter). The recommendation was based on my expectation that the loonie will decline in value against the greenback this year, which would give you a capital gain on any U.S. cash you hold. (Of course if the loonie rises you’ll lose.)
All the big banks offer U.S. dollar accounts and some come with a variety of bells and whistles such as a U.S. currency credit card, cheques, favourable exchange rates, etc. What they don’t offer is respectable interest rates. For example, you would have to deposit at least US$25,000 with TD Bank in order to earn a miserly 0.10 per cent. If you have over US$100,000 you can earn 0.25 per cent with HSBC.
A good U.S. dollar money market fund may offer a better return. For instance, the CIBC U.S. $ Money Market Fund returned 0.61 per cent over the year to Nov. 30. The average for the category over that time was 0.25 per cent.
You can find better rates with some smaller U.S. banks, however they may require a U.S. address. You can search for details at www.bankrate.com/partners/sem/savings-accounts-mma-v3. – G.P
Do you have a money question you’d like to ask Gordon? Find out how to submit it here and then check out our Money section regularly to see if it was chosen for a response. Sorry, we cannot send personal answers.