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Retiring Abroad: How has the Canadian dollar affected plans to retire abroad?

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How has the Canadian dollar affected plans to retire abroad?

In the years leading up to retirement, Canadians start dreaming about how and where they would like to live once they are retired. For some, that could involve a move out of Canada, either for part of the year or full time. As with any investment, the timing of a home purchase can make a big difference for those wanting to retire abroad.

From 2012 to 2017, the Canadian dollar was in a downtrend against the US dollar. For a period of time between 2011 and 2012, the Loonie was at or above par to the Greenback, tempting a number of Canadians to buy homes in destination locations in the US such as Palm Springs, Phoenix and Florida. Once the Canadian dollar dropped, much of that desire to buy dried up.  Early in 2016, the Loonie bottomed out at just below $.69, and recovered somewhat from there. But it wasn’t until the summer of 2017 that the Loonie finally got some legs and decisively broke through the $.80 barrier.

So how has the Canadian dollar fared against other global currencies? We have taken a close look at the currencies of countries that are popular retirement destinations for Canadians (as of September 8, 2017). 

British Pound:  Of the currencies we looked at, the C$ has had the best two year move against the Pound. Over the past year, the C$ has appreciated 7.2% against the British currency, but more pronounced is the two-year appreciation of 26.8%.

Costa Rican Colon: The C$ has appreciated considerably against the Costa Rican currency as well. Over the past year, it is up 13.7% and over the past two years, the C$ is up 18.5%. In practical terms, however, foreigners generally use the U.S. dollar.

Mexican Peso:  The third best result for the C$ has been against the Mexican Peso. Over the past year, the C$ is essentially flat, but over the past two years, it is up 14.7%. This currency has been particularly volatile due to factors such as Donald Trump’s proposal to build a wall along the border and the potential renegotiation of NAFTA.

Belizean Dollar: The next best appreciation for our currency is against the Belizean Dollar: In the last year, it is up 8.5%, and up 9.7% over the last two years.           

U.S. Dollar: As mentioned above, this is the currency we all watch the most as Canadians. The U.S. dollar is also used in popular retirement destinations such as Puerto Rico, El Salvador, US Virgin Islands and Ecuador. The last two years have been a bit of a roller coaster ride, but over the past year, we are up 6.4% and over the past two, 8.7%.

Euro:  The Euro is one of the major currencies of the world. It too has had a bit of a rocky ride vs the US$, however against the C$ it has been relatively stable. The Euro includes the major countries of Europe, including popular retirement destinations such as Malta, Portugal and Spain. Over the past year, the C$ is essentially flat and over the past two years, it is up 1.1% - so relatively flat over the past two years.

Australian Dollar:  It is true that the C$ has been performing well on a global scale, however the Aussie Dollar is the one currency we looked at that has slightly outperformed our Loonie. When we look out over a longer timeframe, the two currencies tend to correlate very closely. Over the past year, the C$ is up 0.9% vs. the Australian Dollar, however over two years, we are actually down 5.4%.