Is a currency safer than the other?

Hello everyone,

I was wondering if having my account in a currency different than the US dollar will be safer.

Here’s what I mean. As far as I know US dollar is not backed up with anything, and I’m not sure if any other currency in the world, but I was thinking that maybe the comdolls would be a safer bet in case of an eventuallity, particularly the australian dollar.

Any thoughts? :rolleyes:

Regards.

No major currency in the world is backed by anything, so there’s no “safe” currency from that perspective. Safe in the currency market is a function of two things. One is your ability to convert and move as needed - meaning no capital or exchange controls or restrictions. The other is loss of value.

The safest currency you can have is the knowledge that currencies aren’t safe.

Thanks for your answers guys, really helpful.

What I was thinking is that since mostly US dollar strenght is based in confidence, well, the world no longer has confidence in it, hence I think nowadays US dollar is more risky.

On the other hand I was assuming (personal opinion without any other knowledge) that comdolls had a strongest psychological back up in case of a huge crisis.

Thanks for your insights. :slight_smile:

All currency values are largely based on confidence. The USD value, though, is also based on the size and strength of the US economy, which is still capable of burying most others in the world. The fact that other countries hold dollars as reserves is another factor in its valuation, one which makes things more complex than what a macro econ book would suggest.

Also consider the fact that if your broker account currency differs from your domestic currency, then you’re essentially always in a trade where you’re long USDCAD (seeing you’re from Canada and assuming a USD denominated broker account).

Keeping your account in CAD removes that constant and unwilling currency risk.

Correct me if I’m wrong Rhodytrader!

If you are in Canada, why not have your account in Canadian dollars since ultimately you will be spending your fabulous gains in Canada at a Ferrari dealership in Canada. You have got to convert to Canadian dollars anyway if you want to buy something here.

Canadian dollars might be a bit safer than US dollars simply because the USD is the currency of a nation that may experience shock waves related to news concerning politics, war, economics, and terrorism. Conversely, there is not a lot of things that could cause, say, the Canadian dollar to go bad as a currency because Canada is a relatively small player and reasonably unengaged from big news stories. It may go down a lot compared to the US dollar, but not against all the other currencies as a whole. But a terrorist attack like 9/11 could plummet the USD dollar in a matter of minutes. Also, big news releases like bad unemployment numbers, big deficit numbers, and the like, are also bad for the USD dollar and all the world traders pay attention to US news.

If you’re looking for safety, there are better things to do but trade.

Everything in life has a safe side and a dangerous side, even the safest things on earth have a dangerous point.

I’m looking for the safer side of trading, assuming that I’ve decided to trade, and that’s a question that just poped up on my mind, so wether I should trade or not is off the table, not the matter of this thread.