The Australian dollar has plunged nearly 15% over the last six months, propelling the share price of some US-dollar exposed stocks to new highs. Investors started piling into stock with U.S. dollar denominated earnings at least 12 months ago when the Australian Reserve Bank started to put serious effort into lowering our dollar. A high Australian dollar hurts exporters, and thus government income.
Foreign Interest
The reason why Australia's dollar rose so far in the first place is because we were one of the few countries in the world where investors could receive a decent yield on their money. Australia's AAA-rated bonds were among the highest yielding worldwide and the big four banks at one point were yielding over 8%, compared with just 1% to 2% in the U.S. and Europe. Australia's comparatively massive yields on low-risk investments saw international funds entering Australia far quicker than they were leaving, boosting the value of our currency.
This is good for Australia's importers, but bad for the many industries that export goods out of the country.
10 Stocks Ready to Move
How times have changed! With the Australian dollar now buying 81 US cents, compared with 95 cents in July, Australian companies that generate some or all profit in U.S. dollars, or that are net exporters, will see a boost in Australian dollar-denominated earnings.
Here are 10 such companies:
- Packaging manufacturer Amcor Limited (ASX: AMC)
- Health and safety protection provider Ansell Limited (ASX: ANN)
- Miner BHP Billiton Limited (ASX: BHP)
- Freight and pooling solutions company Brambles Limited (ASX: BXB)
- Blood products group CSL Limited (ASX: CSL)
- Building products supplier James Hardie Industries plc (ASX: JHX)
- QBE Insurance Group Ltd (ASX: QBE)
- Sleep apnea device producer ResMed Inc. (CHESS) (ASX: RMD)
- Sonic Healthcare Limited (ASX: SHL)
- Shopping centre owner Westfield Corp Ltd (ASX: WFD)
Investors should be careful however, because while profits may rise in Australian dollar terms, it's just as important that they rise in U.S. dollar terms as well. A company that relies on currency movements for profit growth is not a company that Foolish investors should rely on.
