2 quality biotechs likely to benefit from a weak Australian dollar

Cochlear Limited (ASX:COH) and ResMed Inc. (CHESS) (ASX:RMD), are two leading stocks set to profit from a weak Australian dollar.

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The U.S. Federal Reserve left interest rates unchanged on Thursday, 17 September. Concerns over weak global growth and low wage inflation in America were some of the reasons behind the decision not to lift interest rates. There is also no doubt that the American economy is growing and at some point this year or the next, the Federal Reserve will have to raise interest rates. An upward movement in U.S. interest rates will most likely result in a lower Australian dollar.

The softening Australian economy and the possibility of a rate cut by the Reserve Bank of Australia are some of the other factors that could further contribute towards the dollar's decline. Two quality biotechnology firms most likely to benefit from a falling dollar are Cochlear Limited (ASX: COH) and ResMed Inc. (CHESS) (ASX: RMD).

Cochlear Limited

Over 90% of hearing devices manufacturer Cochlear's revenues are denominated in currencies other than the Australian dollar: 43% of the revenue is earned from Americas, 40% is earned from Europe Middle East and Africa (EMEA), and remaining 17% is earned from Asia Pacific region.

The benefit of the depreciating dollar during the last financial year added $32.7 million to the sales. This year the benefit is expected to be considerably higher, as expectations are that the dollar will fall further. In such an environment, Cochlear's stock price is likely to rise as it continues to expand in international markets.

ResMed Inc.

ResMed specialises in sleep and breathing disorder-related medical devices. Its common stock is listed on the New York Stock Exchange (NYSE), but has CHESS Depository Interest (CDIs) listed on the Australian Stock Exchange (ASX).

The CDIs are a type of security used by ASX to allow international companies to trade in the local market. Ten CDIs on the ASX are equivalent to one share of ResMed's common stock. Any depreciation in the Australian dollar will result in the price of CDIs rising due to their direct link with the U.S. dollar. Dividends on the ASX-listed CDIs are paid in Australian dollars.

ResMed currently sells its products in more than 100 countries and has consistently seen revenue and profit rise over the years.

Foolish takeaway

Cochlear and ResMed are quality businesses that operate in a high growth health care sector. Their products have proven successful in international markets. Globally there are many countries where they can still have the scope to grow and expand their market share. A combination of growing business and a depreciating currency should see their share prices rise in a volatile market.

Motley Fool contributor Qaiser Malik has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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