Australian dollar continues to strengthen: Two ways to profit

The Nick Scali Limited (ASX:NCK) share price is one of two which I believe could be given a lift if the Australian dollar continues to strengthen. Here's why…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Overnight the Australian dollar continued to defy the odds and strengthened further after U.S. Federal Reserve chair Janet Yellen stressed that the central bank plans to take a gradual approach to tightening due to uncertainty around inflation.

At the time of writing the Australian dollar was fetching 76.8 U.S. cents. This means it has gained over 4% in just the last two months.

Whilst I believe this strengthening may be short-lived and expect the Australian dollar to weaken considerably over the next 12 months, should things not go to plan then a number of ASX-listed companies could benefit.

Here are a couple of shares worth considering if you are bullish on the Australian dollar moving forward:

Nick Scali Limited (ASX: NCK)

This leading furniture retailer holds very little inventory and instead imports stock when an order is placed. The majority of its stock purchases are made in U.S. dollars, which means that a strong Australian dollar is a bonus for the company. The company can then either pass these savings onto the customer in order to boost sales, or enjoy higher margins on the products it sells.

Reject Shop Ltd (ASX: TRS)

This discount retailer is another company I would expect to benefit from a stronger Australian dollar. As the company imports a lot of its inventory, a strong local currency gives it more bang for the buck. This should ultimately result in wider margins. However, the company would still have to overcome weak trading conditions and fellow discount retailer Aldi before it would see any real benefits.

Finally, if you're bearish on the Australian dollar like I am, then I would suggest you consider an investment in companies like Nanosonics Ltd. (ASX: NAN) and CSL Limited (ASX: CSL).

Both of these companies generate a significant portion of their revenue in the United States and would benefit greatly from favourable currency movements.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Nanosonics Limited. 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »