@Jo62 , while agreeing with the explanation provided by @ThomasM125 , I would like to point out the following:
1. Financial assets are generally liquid or semi liquid i.e. they are or can be easily converted cash, while assets are generally non-liquid assets --- same definition whether in the US or foreign
2. A CD foreign or otherwise is not a Capital asset -- it is generally an interest bearing financial asset and its income is treated as interest earnings. Thus you cannot claim Capital loss --- it is loss in interest earnings in US dollar terms but in that foreign country you must have designated as local currency CD.
3. IRS would argue that this loss ( due to rising UD$) of interest earning should have been taken into account while you used local currency -- it is an understood and inherent risk when dealing with foreign currency.
So , IMHO, you cannot claim Capital loss ( because this is not Capital asset ) and /or foreign exchange based loss ( because you were or should have been aware of the risks of foreign currency and because your operating currency is US$ ). You may be able to claim casualty loss but I am not sure of this.
Does this make sense or am I totally in left field.? By the way which country are you talking about --- may be there is some reprieve in the tax treaty ( unlikely though , from the ones I am aware of ).
pk
