The U.S. dollar came to life in 2014, after years in the doldrums. It gained dramatically against many of the world’s currencies, creating a buying opportunity for dollar holders that is unprecedented in recent memory.
Even though the U.S. dollar is off its peak against virtually every currency, it still has a strong advantage in certain markets and far more buying power than it had in 2013. But in other markets, while the U.S. dollar still holds an advantage, that buying power is significantly less than it used to be. Here’s a look at the U.S. dollar’s performance since the run-up and where some of the bargains lie:
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The U.S. dollar made an impressive gain starting in 2013. The U.S. dollar made an unexpected turnaround in 2013 and 2014. It started climbing against many of the world’s currencies at an impressive rate.
This resulted in a rare opportunity for property investors, who suddenly found properties available abroad at a huge discount, in U.S. dollar terms. At the peak of the U.S. dollar’s run-up buyers in Brazil saw a significant increase in their buying power. Colombia was not far behind, and even Europe wound back the clocks to rates not seen since 2003.
However, it’s difficult to take advantage of these kinds of deals. Many buyers don’t want to buy at a good rate, because they’re waiting for the best rate. Unfortunately, you never know what the best rate is until after the fact, so most people miss the peak. When taking currencies into consideration prior to a purchase, look at where the exchange rate is by historic standards. You probably won’t be able to pick the perfect moment.
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What happened with major markets over the past year. The past year has been somewhat stable in Latin America, while the U.S. dollar lost significant buying power in Europe, Canada and the U.K.
Brazil was the only country where the U.S. dollar actually gained buying power, while Colombia was unchanged. The most dramatic loss of the U.S. dollar’s buying power was against the pound sterling, as investors set aside some of their Brexit fears.
Forget the past: Here’s where your buying power lies today. Don’t worry about missing the peak. The important thing is to keep the U.S. dollar’s buying power in historical perspective and take stock of where the U.S. dollar is today. There are still some strong currency bargains out there.
Colombia has retained the strongest buying power for people with U.S. dollars to spend. Dollar holders still have 67 percent more buying power than they had in 2013. Today’s $100,000 purchase cost almost $167,000 in 2013.
Brazil comes in close behind Colombia, with U.S. dollars sporting 54 percent more buying power than they had in 2013. A $100,000 purchase in Brazil would have cost you $154,000 in 2013.
Mexico comes in at third place, offering a dollar holder almost 44 percent more buying power than he had in 2013. Mexico’s performance did not track with most other currencies, and there has been a “Trump effect” related to the president’s campaign promise to scrap the free trade agreement, NAFTA. Those concerns are now diminished, and the currency has partially recovered. Remember, your advantage in Mexico only applies to properties priced in pesos, not to those priced in U.S. dollars.
Europe experienced less dramatic changes, but it still offers a 12.6 percent increase in buying power since 2013. If you’d like to buy in Europe, then a 12 percent discount is certainly welcome. A hypothetical $100,000 apartment would have sold for $112,500 in 2013.
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Keeping currencies in perspective. Currency experts are often extremely accurate at explaining the past, but can’t predict the future. But reflecting on the past has value in this case. It can put today’s exchange rates in perspective and help you identify when exchange rates are a good (or bad) deal in relation to the currency’s history.
While exchange rates are seldom a deal breaker, they should factor into the overall picture when considering a property priced in a foreign currency and which countries make a good place to live and retire. By historic standards, U.S. dollar holders still hold an advantage in many key markets around the world.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group.
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Retirement Spots With Favorable Exchange Rates originally appeared on usnews.com
