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Purpose High Interest Savings Fund (PSA)
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Global X High Interest Savings ETF (CASH)
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US High Interest Savings Account Fund (HISU.U)
Q: Hi 5i, I have a fair bit parked in CASH and PSA, enjoying the decent interest on the funds I dont want to have exposed to market volatility. My question is, if Canadian interest rates drop significantly sooner and/or further than US rates, would it make any sense to move out of CASH or PSA and in to something like HISU.U?
Understand, of course, this introduces the element of currency risk/volatility. But, ignoring that, would this strategy work to continue realizing interest rates of +/- 5% (assuming US holds longer)?
Thanks!
Understand, of course, this introduces the element of currency risk/volatility. But, ignoring that, would this strategy work to continue realizing interest rates of +/- 5% (assuming US holds longer)?
Thanks!
5i Research Answer:
In theory this should work; HISU invests in US dollar deposit accounts, and US rates should remain higher than Canadian rates if the Canadian economy remains weaker than the US economy. Yes, there is a currency impact here, but under such a scenario we would expect the impact to be positive (i.e. the US dollar should be stronger) in addition to higher rates. We would be comfortable with this plan, but keep in mind that currency markets have a nasty way of often not doing what they are 'supposed' to do.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in PSA.