At 80.2 U.S. cents I think it is fair to say that the Australian dollar is uncomfortably high for many exporters and the Reserve Bank of Australia (RBA).
But as far as one leading international bank is concerned, the local currency could still strengthen significantly from here.
According to a note out of HSBC's FX team, courtesy of Business Insider, its analysts expect the Australian dollar to rise to 90 U.S. cents by the middle of 2018.
HSBC believes that improvements in inflation and wage growth will allow the RBA to increase rates in the first-quarter of 2018, causing the Australian dollar to rally against the U.S. dollar.
This is a very different outlook to what economists at Westpac Banking Corp (ASX: WBC) have predicted.
According to its latest Westpac Weekly, Westpac expects rates to stay on hold well into 2019. As a result, the bank's economists believe this will lead to the local currency weakening to 70 U.S. cents over the next 18 months.
What next?
Although I think HSBC makes some valid points, I still favour Westpac's view that rates will stay on hold for a long time to come and the Australian dollar will weaken against its U.S. counterpart.
This could make it an opportune time to invest in companies that earn significant revenue in the United States.
The currency headwinds they faced in FY 2017 will become tailwinds in FY 2018 if the Australian dollar does fall as most economists predict.
Companies I would consider are Nanosonics Ltd. (ASX: NAN), Appen Ltd (ASX: APX), and CSL Limited (ASX: CSL).
