The U.S. dollar has been losing ground against most major currencies this year, and analysts expect a further 20 % decline once COVID‑19 vaccines become widely available. A Financial Times report warns that the expected economic rebound could push the dollar down another three percent this year, adding to the slide already seen after a pandemic‑driven rally in early 2020.
Currency movements since the pandemic began
- Euro: fell from a parity of 1.06 USD/EUR in March 2020 to around 1.19 USD/EUR, then briefly recovered to 1.07 before rising again.
- British pound: approached parity with the dollar in early 2020.
- Australian dollar: briefly reached a 2 : 1 ratio against the U.S. dollar.
- Armenian dram: one of the few currencies that has kept pace with the dollar, offering higher interest rates while remaining stable.
These fluctuations illustrate how quickly exchange rates can move, affecting the cost of overseas investments and residency programs.
Golden‑visa and residency‑by‑investment programs
Many countries sell residency or citizenship in exchange for real‑estate purchases or other investments. Typical price points mentioned include:
- Portugal, Latvia, Panama – programs often start around €250,000 for residency.
- Turkey – citizenship can be obtained through property investment, though the Turkish lira has experienced a steep decline.
Because the required investment is denominated in foreign currency, a weakening dollar can make the effective cost of these programs rise. For example, a €250,000 investment that was €250,000 when the euro was at 1.07 USD/EUR becomes effectively €300,000 when the euro strengthens to 1.19 USD/EUR.
Risks of holding only U.S. dollars
- Higher living costs abroad: A weaker dollar means everyday expenses (e.g., a gelato in Italy) become more expensive for U.S. travelers.
- Reduced purchasing power for foreign assets: Real‑estate, bank deposits, and other investments priced in stronger currencies lose value when converted from a depreciating dollar.
- Potential travel restrictions: Some countries have limited entry for U.S. passport holders during pandemic spikes, reducing the utility of the U.S. passport for global mobility.
Diversification strategies
To mitigate currency risk, the transcript suggests several hedging approaches:
- Dollar‑cost averaging into foreign currencies rather than converting a lump sum at a single exchange rate.
- Holding precious metals (gold, silver) as a traditional store of value.
- Investing in cryptocurrencies for those comfortable with higher volatility.
- Acquiring real‑estate denominated in a stable foreign currency (e.g., Armenian dram, euro‑denominated property).
- Using offshore bank deposits to spread cash holdings across multiple jurisdictions.
Practical steps for investors
- Assess exchange‑rate trends for the currencies tied to any residency or citizenship program you are considering.
- Calculate the effective cost of the investment in both your home currency and the target currency, factoring in possible future exchange‑rate moves.
- Implement a dollar‑cost‑averaging plan to spread conversion risk over time rather than committing a large sum at once.
- Diversify across asset classes (real‑estate, metals, crypto, bank deposits) to reduce reliance on any single currency’s performance.
- Monitor macro‑economic forecasts—particularly expectations around vaccine rollouts and their impact on global demand for the dollar.
By recognizing that the dollar’s value can decline further and that currency fluctuations directly affect the cost of overseas residency programs, investors can better time their diversification moves and protect the purchasing power of their capital.
