What: Both domestic and overseas factors have brought the Australian dollar (AUD) under selling pressure; on Thursday morning the AUD was back under 95 US cents. While some businesses face drawbacks from a lower AUD, for many companies a weaker currency will provide a much needed tailwind.
So what: Two stocks which have found favour with investors at least in part thanks to the drop in the AUD are BlueScope Steel Limited (ASX: BSL) and Fortescue Metals Group Limited (ASX: FMG), with their shareholders enjoying price gains of around 7% and 5% respectively. Both companies earn a significant portion of their revenues in US dollars; a weaker exchange rate means that their earnings are worth more when converted back into AUD.
Now what: Investors have long known that the AUD is overvalued and that in time it should head lower. While the timeframe for this to occur is difficult to determine, it's important for investors to be aware of how they can position their portfolios to benefit from an eventual decline.
Two areas of opportunity include owning exporters such as Fortescue, BHP Billiton Limited (ASX: BHP) and Santos Ltd (ASX: STO), and owning companies with significant foreign currency earnings such as Cochlear Limited (ASX: COH), Ramsay Health Care Limited (ASX: RHC) and Ansell Limited (ASX: ANN).
