The U.S. dollar has been on its longest consecutive rally in nearly two decades. It began to rise relative to other major currencies after hitting a record low in August 2011. There are likely two reasons for this new strength. First, the U.S. economy is now growing faster than most other developed countries. Secondly, the Federal Reserve appears closer to making a long-anticipated interest rate increase, possibly ahead of other central banks around the world, many of which continue to cut rates in an effort to stimulate their lackluster economies. If this happens, the resulting interest rate differential could spur additional demand for the U.S. dollar.

What does a stronger U.S. dollar mean for Canadian investors? I believe it can provide an opportunity to enhance returns by selectively holding certain U.S. dollar-denominated assets.  For a free report from one of our investment partners, Mackenzie Investments, send me an e-mail at mdumais@pifinancial.com.