Exchange rate

Old Sep 1st 2008, 4:49 pm
  #1441  
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Default Re: Exchange rate

Originally Posted by Surrey Expat View Post
Once you become a tax resident in Canada, that is taxed at your marginal rate.
So you don't get to keep it all.
Granted, but the net rate 7% is still higher than the net rate on the 4.75% I'm currently getting
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Old Sep 1st 2008, 5:38 pm
  #1442  
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Default Re: Exchange rate

Chancellor joins the assault on Sterling
- "Worst" UK economic downturn in 60 years
- Canadian growth disappoints in Q2

Sterling never made it much higher than Tuesday's $1.94 opening. It spent the week in range between there and $1.91, opening in London this morning at $1.9250.

Three-day weekends in London and New York bracketed a short and illiquid four-day trading period. Market reactions to the news and data were not always as logical or measured as might normally be expected. A sharp drop in German business confidence on Tuesday did just as much damage to the Pound as it did to the Euro. The retrospective justification was that a downturn in Germany would mean a downturn in the Euro zone as a whole; bad news for British exports to its biggest trading partner. Looking at Sterling's performance on Thursday it was hard to believe that Nationwide's house price index and the CBI's Distributive Trends survey had both just delivered their worst results ever; the Pound held within a half cent range against the Euro and was unchanged on the day.

There was no such indifference to Chancellor Alistair Darling's weekend interview when he told The Guardian that Britain faces "arguably the worst" economic downturn in 60 years which will be "more profound and long-lasting" than people expect. His words came as an "et tu Brute" for Sterling, costing it two cents against the Dollar and the Swiss Franc, a cent against the Euro and nearly three Yen over the weekend. The surreal image springs to mind of Britain's finance minister joining his central banker to chuck concrete lifebelts at their currency. With friends like these the Pound needs no enemies.

The Canadian Dollar did almost as badly as Sterling. Figures on Friday for second quarter GDP showed slower than expected 0.3 per growth. Because the number was positive it avoided the technical definition of recession (two or more successive quarters of contraction). It still meant however, after a 0.8 per cent decline in Q1, that Canada's economy shrank in the first six months of the year.

The main culprit in the slowdown was external trade. Between December and June the Loonie's average exchange rate against the US Dollar was close to par. The strong currency sucked in imports and dampened exports.

Canada's economic slowdown leads some analysts to believe the next move for Canadian interest rates will be downwards. Few look for any change at this week's policy meeting but the odds have definitely shortened and the Loonie is feeling the strain. The same argument applies to UK interest rates and Sterling after the chancellor's hatchet job. The Pound is still - just - within the extremes of its 12 month range against the Canadian Dollar but on other fronts it looks very vulnerable. Buyers of the Canadian Dollar should continue to hedge, buying half their requirement forward.
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Old Sep 1st 2008, 6:02 pm
  #1443  
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Default Re: Exchange rate

Originally Posted by Southcote View Post
Granted, but the net rate 7% is still higher than the net rate on the 4.75% I'm currently getting
You will also have to deal with currency gain (or loss) on any interest earned then converted to CDN$. Tax is due on interest paid as well as any gain (or offset as a loss) on the currency at the time it is exchanged from the time it was paid. Also the capital sum invested is subject to a currency gain (or loss) and is subject to taxation at the time of conversion.

Any foreign property or funds held valued at over $100,000 should be declared on your Canadian tax return.

'Foreign currency funds on deposit are not considered to be disposed of until they are converted into another currency or are used to purchase a negotiable instrument or some other asset, i.e. foreign funds on deposit may be moved from one form of deposit to another as long as such funds can continue to be viewed as "on deposit". Term deposits, guaranteed investment certificates and other similar deposits which are in fact not negotiable, are considered funds on deposit. Transactions in which foreign currency funds are invested in negotiable instruments such as notes, bonds mortgages, debentures, U.S. government treasury bills and notes and U.S. commercial paper, will require a foreign exchange gain or loss calculation at the time the foreign currency funds are used to purchase these investments and as well, each time such investments mature or are otherwise disposed of, whether or not the funds are rolled over into like securities.'

Depending on the movement of the exchange rate, any gain in interest can be easily and quickly lost if the exchange goes against you. In the last 18 months the GBP/CDN has dropped over 17%. On a £200,000 investment the difference could be in the region of an extra £4500 if the rate is unchanged. If you had held that 18 months ago your £200,000 would have netted you
CDN$468,000, today it could have been in the region of CDN$383,000, a loss of CDN$85000, offset by a 2.25 gain in interest rate of say CDN$8595, a net loss of CDN$76400

This is not financial or investment advice, it is a simplistic approach and gains and losses can be quite variable, there are never any certainties with currency exchange. However hopefully this illustrates a few of the considerations, weighing the potential gain of 2.25 in interest with the potential costs and risks, not to mention the hassle.

You may be best to consult a financial professional (accountant) before making a decision.

P.S. You mentioned net rates. Interest in Canada is paid gross, tax comes off that. Is the rate you are looking at in the UK net or gross?

Last edited by Surrey Expat; Sep 1st 2008 at 6:07 pm. Reason: Post script added
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Old Sep 1st 2008, 8:53 pm
  #1444  
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Default Re: Exchange rate

UK banks generally advertise the net rate. If you are a none resident in the UK and have no taxable UK income yo can comlete a form from your UK bank to ahve the interest payed tax free.
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Old Sep 2nd 2008, 3:15 pm
  #1445  
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Default Re: Exchange rate

Originally Posted by destinationnovascotia View Post
UK banks generally advertise the net rate. If you are a none resident in the UK and have no taxable UK income yo can comlete a form from your UK bank to ahve the interest payed tax free.
Nett rate - After Tax
Gross - Before tax

If 7.5% is paid nett and as a non tax payer you get gross, then the effective rate is quite a lot higher than 7.5%. Might want to check this our for confirmation. My guess is the quoted rate is gross, before tax. The rates i found on Nat West are more in the region of 4.5% to 5.13% (gross), not far off those of Canada and with the added risk of exchange fluctuations.

Today's rate on the GBP/CDN - $1.88 small amounts and $1.90 larger sums. Just when you think it cannot go further.
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Old Sep 2nd 2008, 6:52 pm
  #1446  
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Default Re: Exchange rate

Originally Posted by destinationnovascotia View Post
UK banks generally advertise the net rate. If you are a none resident in the UK and have no taxable UK income yo can comlete a form from your UK bank to ahve the interest payed tax free.
I think they quote gross rates in the UK.
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Old Sep 2nd 2008, 7:24 pm
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Default Re: Exchange rate

Originally Posted by G586 View Post
I think they quote gross rates in the UK.
Really!! I really is my week for misunderstanding everything. Can I still blame jet lag after 3 weeks?
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Old Sep 2nd 2008, 7:38 pm
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Default Re: Exchange rate

Originally Posted by destinationnovascotia View Post
Really!! I really is my week for misunderstanding everything. Can I still blame jet lag after 3 weeks?
Of course!

I get horrific jetlag, much sympathy.
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Old Sep 2nd 2008, 11:29 pm
  #1449  
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Default Re: Exchange rate

I would have thought that the announcement about upping the stamp duty threshold to 175k would have had some positive effect on the exchange rate, but, as it's currently floating around the 1.90 mark, obviously not.
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Old Sep 3rd 2008, 1:16 am
  #1450  
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Default Re: Exchange rate

That in no way makes the UK a more attractive investment. House prices are still hugely overvalued. Tomorrow is Bank of Canada rate announcement, the market is expecting unchanged. Then Thursday is rate decisions in Europe, same expected there. US unemployment numbers follow on Friday.
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Old Sep 3rd 2008, 3:47 am
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Default Re: Exchange rate

Originally Posted by vegasrockstar View Post
I would have thought that the announcement about upping the stamp duty threshold to 175k would have had some positive effect on the exchange rate, but, as it's currently floating around the 1.90 mark, obviously not.
I feel sick.....
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Old Sep 3rd 2008, 9:07 am
  #1452  
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Unhappy Re: Exchange rate

Xrate just getting worse 1.89 GDP/CAD now

It would be better if Darling/Brown/UK GOV just shut up!! rather than talk us into a recession.

If these moron's were like normal people in any other job they would have been fired long ago - sheer incompetence and corruption in claiming expenses/wasting taxpayer money etc... is beyond belief!

I'm now worried whether I can achieve/realise the reasons why I intended to move to Calgary/Canada because of the strength of CAD $ . This would now leave me in a seriously weaker position to start from than I am presently in the UK?

Anyone else in a similar frame of mind have these worries?

I'm just praying (all I can do) that some normality returns to the Xrate market but I'm fearing the worst............
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Old Sep 3rd 2008, 3:30 pm
  #1453  
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Default Re: Exchange rate

Originally Posted by APC View Post
Xrate just getting worse 1.89 GDP/CAD now

It would be better if Darling/Brown/UK GOV just shut up!! rather than talk us into a recession.

I'm just praying (all I can do) that some normality returns to the Xrate market but I'm fearing the worst............
With the morons "in charge" of the UK it can only get worse. They are an absolute joke. "No more boom and bust" my @rse. I can see the pound in free-fall until these loonies are driven out of office.

There are some saying darling did this on purpose to weaken the pound which will be good for exports. What exports???? We don't make anything anymore. But we do import just about everything.... imagine what that will do for inflation.

Victor Meldrew mode off.
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Old Sep 4th 2008, 1:22 pm
  #1454  
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Default Re: Exchange rate

1.88 now on yahoo
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Old Sep 4th 2008, 1:31 pm
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Default Re: Exchange rate

Eh? 1.88...on yahoo...to buy currency?
Sorry to be thick, do you mean yahoo the email people?
I'm all of a fluster!
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