Stock winners from the falling Aussie dollar

Chairman, Wilson Asset Management
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Key points

  • A new bull market for the US dollar.
  • Companies with an export-focus will do well.
  • Examples include Aristocrat Leisure, Austal Ships and Infomedia.

The recent slide in the value of the Australian dollar has seen it dipping well below the parity levels of recent years to reach just under 87 cents against the Greenback – down around 8% since its most recent highs of July. We believe the dramatic fall reflects the repatriation of cash by overseas fund managers, as the likelihood of US interest rate rises grows, while the RBA is expected to keep our rates on hold.

With the Aussie dollar trading well above its long-term average for almost a decade now, and with the iron ore price at these depressed levels, we predict the Aussie dollar will trade in the 70 to 80 US cent range for the next couple of years. With the dollar likely to go lower, we are looking for companies with exposure to US earnings. Here I discuss the various sectors and stocks that are set to be winners from the weaker Aussie and discuss some of the broader macro impacts of the stronger American dollar.

The US dollar’s new bull market

Economist and author George Magnus, who is widely credited with predicting the devastating and global economic impact of the US subprime mortgage crisis, recently wrote about what he calls the US dollar’s new bull market.

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