Best US Dollar, Foreign Currency GIC Rates in Canada

A foreign currency GIC allows you to access the currency of the country in question with still bearing an interest. In Canada, one can invest in the Yen of Japan, the pound of Britain, Euro and the dollar of the U.S. However, the latter dominates the GICs.

Best US Dollar, Foreign Currency GIC Rates in Canada

Term

1 Year

Type

USD

Minimum investment

$5,000

Interest paid

annually

Term

1 Year

Type

USD

Minimum investment

$1

Interest paid

annually

Term

1 Year

Type

USD

Minimum investment

$1,000

Interest paid

annually

Investing in GICs allows you access to the currency of the country issuing the investment product and has several advantages. While the most commonly traded currency is the US Dollar, which is the global reserve currency, your bank may offer you GICs in the British Pound, Japanese Yen, and Euro.

How does a US Dollar GIC work?

Say, for instance, you intend to travel to the US in the next six months. You can buy a US Dollar GIC and set aside the funds you’ll need. Not only will the investment earn interest for you, but it will also lock in favourable rates if you think that the Canadian dollar value is likely to drop. You can also buy the US Dollar GICs purely for investment purposes. You’ll add diversity to your portfolio and earn good returns from currency appreciation.

Investing in Foreign GICs May Have a Few Downsides

While purchasing GICs is a good option, you may want to keep certain factors in mind.

  • You can buy US Dollar GICs and term deposits with a registered account.
  • You’ll likely earn a lower rate of interest in a foreign GIC as compared to the interest on a Candian Dollar GIC.
  • Foreign currency GICs don’t carry CDIC insurance. In case the issuing bank or financial institution fails, you have no assurance of getting your investment back.
  • When investing in GICs, you should be aware of the bank’s “spread.” Each time the bank trades in foreign currency, they add a spread of 1% to 1.5% above the market rate when buying. Banks also sell at a similar rate below the market value.

If you would more information about how GICs work, log onto our offerhub.ca website and we’ll give you in-depth details that will help you make a choice.

Why invest in foreign currency GICs?

A GIC of an external currency allows you to access the currency of the country that it is associated with, if in future its need arises, and interest is earned when it is invested. However, foreign currencies GICs are nowhere found in the travellers’ list. Both U.S. and Canadian dollars are followed by the majority of investors and should you suspect a significant decline in the Canadian Dollar in the future, as a result of the decline, you would get a profit if you would invest in U.S. dollar GIC. Therefore, diversification of your cash and preservation your power to purchase would be possible via the addition of an external currency GIC to your investment selection.

Are there any drawbacks to investing in foreign currency GICs?

Here are some of the things you should22 consider when choosing to invest in foreign currencies;

  1. CDIC insurance does not cover the external currency GICs hence, no guarantee of getting the money back.
  2. The rates on currency GICs of foreign nature can be minimal, in comparison to GICs from Canada.
  3. The banks sell the investments and a high rate and buy at a low rate hence diminishing your returns
  4. For the U.S. GICs and term deposits are not offered within registered accounts.
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