How Currency Exchange Rates Can Affect Your Investing Decisions — The Motley Fool

A full transcript follows the video.

This video was recorded on March 27, 2017.

Chris Hill: Our email address is marketfoolery@fool.com. From Matt Saunders in Nestleton, Ontario. “I was hoping you could explain the effects of currency exchange on stock purchases. I’m in Canada and our dollar is quite low compared to the U.S. dollar. However, it wasn’t too many years ago, we peaked a little higher than the U.S. dollar. My concern is that if I buy a U.S. company at this point and the dollar rises again, will that work against the value of the U.S. company that I purchased? Or does buying on the TSX compensate for that somehow? Thanks for all your help with this. P.S. please tell Steve Broido, we just made a trip to Orlando and had a great visit to an Olive Garden there. Definitely a fan.” Steve will appreciate that, I’m sure.

Taylor Muckerman: Yeah. Thanks for listening all the way from Ontario. This was a question that we receive quite often in Stock Advisor Canada, Pro Canada, and now Dividend Investor Canada. We put a special report about this a couple years back. Over those couple years, not much has changed. Remain to see the Canadian dollar still trading below the U.S. dollar. I think right now, it’s around $0.75 to the U.S. dollar. As you did mention earlier in the 2000s, the Canadian dollar did peak around $1.20 to the U.S. dollar. That ramp-up really did cramp Canadian investors’ returns when you look at it, from investing in the U.S. dollar. When the Canadian dollar does appreciate, you lose a little bit there when you sell back into the Canadian market. So, what we generally tell our members to do is, A) we absolutely recommend investing in the U.S. market, because when you look at the Canadian market, about two-thirds of it relies on the energy, financials, and the materials sector, two very volatile sectors, in the energy and materials sector and then financials,…

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