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A teller counts U.S. dollars at a money changer in Jakarta, Indonesia May 18.Nyimas Laula/Reuters

Ever since the loonie took a swan dive off the currency cliff, I've been getting questions from readers asking for advice on how to minimize foreign exchange costs.

These queries typically take two forms. The first is for guidance on the best time to convert loonies to U.S. dollars. The second is for advice on where to invest to earn U.S. dollar cash flow. Here's one recent question:

"For the first time in my life, I will be spending the upcoming winter in Florida. I would like to know the best way to build a U.S. cash position. Currently I am converting Canadian money to U.S. periodically; similar to a dollar cost averaging strategy.

"Furthermore, I currently own some companies that pay dividends in U.S. dollars. However, these securities are in my Canadian dollar brokerage account. The U.S. dividends are converted to Canadian dollars when they are paid. I am considering transferring them to a U.S. dollar brokerage account so that the dividends remain in U.S. dollars. Can you discuss the merits and negative aspects of this idea?" – Stewart B.

To deal with part one of this question first, setting up a U.S. dollar account with a Canadian broker to generate cash flow is an excellent way to build currency reserves. As long as the account is held in Canada there are no negative implications beyond the fact you have to convert any profits/losses back to Canadian dollars for tax reporting purposes.

You can use the account to hold stocks that pay U.S. dividends, either U.S. companies or Canadian firms that are interlisted in New York. But that's not all. You can also buy unhedged U.S. dollar ETFs and mutual funds to provide more diversification.

Last week, Mackenzie Financial announced a suite of four new true U.S. dollar funds for retail investors. These funds are primarily exposed to U.S. dollars through U.S. securities and/or hedging non-U.S. currency exposure back to U.S. dollars. They can also be purchased, settled, redeemed, and have their performance and NAV (net asset value) reported in U.S. dollars.

"There is an increasing demand for U.S. dollar investments, whether it is investors planning to spend time in the U.S. during retirement or those Canadians who want to keep investments in U.S. dollars," said Michael Schnitman, a Mackenzie senior vice president. "With our expanded suite of true U.S. dollar products, we have made U.S. dollar investing straightforward and ensured we'll be there to meet their investment needs."

The new funds all focus on fixed-income securities and include a low-risk ultra-short duration income fund, a global tactical bond fund, and global strategic income fund, and a U.S. dollar convertible securities fund.

Mackenzie isn't the only company offering this type of option; a financial adviser can help you identify others.

One other advantage of a U.S. dollar brokerage account is that the exchange rate is usually more favourable than you'll get from a bank, especially when large amounts of money are involved.

As for when to exchange loonies for greenbacks, there is no easy formula. The currency markets are extremely volatile right now. The loonie dropped about a cent and a half in a single day last week in response to a sharp decline in the price of oil.

The idea of using a dollar cost averaging approach over several months is a viable option and should work as long as the Canadian dollar doesn't move into a steady downward trend. My inclination, however, would be to exchange some money any time there is a spike in the loonie, as we saw earlier this month when it traded over 83 cents (U.S.) for several days.

The projections from economists on where the loonie goes from here are all over the map, although the consensus appears to be that there's more downside risk than upside potential at this stage. So take advantage of the opportunities when they occur.

One other idea is to get a U.S. credit card tied to a U.S. dollar bank account to use while you are in the States. Using a Canadian dollar card can be very expensive as you get hit twice – once on the exchange rate and the second time on a 2.5 per cent foreign currency transaction charge.

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