Less than a month ago, Alan Ruskin and George Saravelos, macro strategists at Deutsche Bank proclaimed the Australian dollar was the ““most overvalued currency in the world”.  At the time the Australian dollar was around 73 US cents.

Yet the majority of Australian currency experts tend to believe that the dollar is fairly priced at the moment, so long as commodity prices remain around the current range. These estimates are backed up by Reserve Bank modelling.

All those who offer an opinion on the value of the Australian currency have also included a proviso that the Australian dollar is likely to fall further. In the main, this is attributed to the increased likelihood of Australia’s Reserve Bank cutting interest rates while the US Federal Reserve is heading in the opposite direction.

On Friday night a spanner was thrown into the works of this theory when US job figures were substantially lower than expected. This led to a jump in the Australian dollar back to over 74 US cents.

So where does this leave investors in companies such as CSL Limited (ASX: CSL) or BHP Billiton Limited (ASX: BHP)? CSL derives a large percentage of its revenue from outside of Australia, while mining companies such as BHP will benefit by receiving more in Australian currency terms if the dollar falls further.

While a large number of financial journals have suggested that now is the time to take advantage of a possible decline in the Australian dollar, I believe this may be the wrong approach for two reasons.

Firstly any investment should be entered into only if the company is a solid investment and its valuation is compelling, not because it may benefit from currency gains which may or may not eventuate. Secondly, I believe it is not the right time to take advantage of currency movements when the Australian dollar is considered to be fair value.

Expanding on my second point, the only time I would consider currency rates when investing in equities is if the Australian dollar is well outside its normal range either well above or below its fair value level.

As an example investors would be wise to look at buying companies with overseas exposure when the Australian dollar is high and above its fair value range such as the end of 2013. This is because the company benefits when the dollar returns towards fair value over time. It is also more likely that the company at this time will be offered at a price lower than its intrinsic value because of the short-term currency headwinds.

Foolish takeaway

For the record I am firmly in the camp that believes the Australian dollar will continue to decline but I also have to confess my record for such predictions is less than spectacular. The bottom line is that I have been successful in investing in what I see, rather than what may be. (Apologies to the late great Muhammed Ali for my feeble attempt at rhyme).

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Motley Fool contributor Alan Edmunds owns shares of CSL Ltd.. 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.