Russia buys Canadian dollars--shouldn't you?

01/21/2010 4:18 pm EST


Jim Jubak

Founder and Editor,

So what took them so long?

On January 20, Russia’s central bank announced that it had started buying Canadian dollars and Canadian-dollar-denominated bonds to diversify its foreign exchange reserves.

We’re not talking about a huge allocation to Canadian-dollar-denominated assets—maybe around 2%. But Russia has the world’s third-largest foreign exchange reserves at $439 billion so even 2% comes to about $9 billion worth of Canadian currency and bonds.

The logic is pretty simple, I think. The Russia reserves have been split about 50%/50% between dollars and Euros. Neither currency seems a great bet at the moment and worries about high debt loans in the United States and the euro zone could keep the currencies weak for years.

In contrast Canada’s government accounts are in good shape and the country’s commodity-based economy is solid insurance that the country’s economy will growth with the world economy.

If you’re looking for stability in a very volatile world, Canada certainly fits the bill, the Russian central bank is saying.

What to buy if you want to follow suit?

I own three Canadian stocks in Jubak’s Picks—Goldcorp (GG), Thompson Creek Metals (TC) and Potash of Saskatchewan (POT)—and five in the Jubak Picks 50—Canadian National Railway (CNI), Enbridge (ENB), EnCana (ECA), Goldcorp, and Kinross Gold (KGC). If you’d like to up your exposure to Canada take a look at Alliance Grain Traders (AGXXF), Bank of Montreal (BMO), Toronto-Dominion Bank, and Manulife (MFC). Buying the IShares MSCI Canada ETF (EWC) will give you broad exposure to the whole market.

Full disclosure: I own shares of Goldcorp, Potash of Saskatchewan, and Thompson Creek Metals in my personal portfolio.
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