Aussie dollar set to fall

Downward pressure continues to build

Fancy an overseas holiday or an iPad or Kindle full of e-books? Now’s probably the best time to do your overseas shopping or book that US trip.

The Australian dollar recently hit a six week low and is currently trading around 102.44 US cents – down from a mid-August high of  close to 106 US cents.

The pressure on it to fall further has intensified, with our biggest export market, China, slowing. Iron ore and coal prices have fallen more than 30% in less than six months.

Locally, the housing industry is struggling, retailers are struggling and some media companies see no lift in the current bleak advertising market until 2015.

Because our dollar is closely linked to commodities prices (being our major export), usually the dollar will follow. But the Australian dollar has been stubborn and stayed high, while commodity prices fell. Much of the reason for that is with the rest of the world struggling with their own issues, Australia has been seen as a relative safe haven for capital. Even the Swiss central bank started buying Australian dollars.

As I see it, one of the main catalysts for the Australian dollar to fall further from here, are the actions by the European Central Bank and the US Federal Reserve. If the US decides to stimulate its economy, or Europe takes control of its debt issues, we could see the Australian dollar take a rapid dive – investors would likely have more confidence in Europe and the US, and we could see the Australian dollar deserted in favour of the Euro or US dollar.

Markets around the world appear to be expecting positive action to be taken by both regions, which means an Australian dollar trading above parity with the US dollar should not be taken for granted.

But while it does, investors and consumers have an opportunity to take advantage of the high dollar. If you plan on booking that overseas trip, now might be the best time to walk into a Flight Centre Limited (ASX: FLT) agent or get online to Webjet Limited’s (ASX: WEB) site and book those overseas holidays.

Shopping at US and other online sites, such as Amazon might also be a good idea now. Investors might consider investing in US or European companies, as shares are cheap – both because of the high Australian dollar and the weak sentiment in those regions. Actions by the respective central banks could see those markets take off. It’s also ideal protection should the Australian economy falter.

Investors could also consider an investment in one of the many ASX listed companies with the majority of their earnings offshore, such as CSL Limited (ASX: CSL) or News Corporation (ASX: NWS). If individual companies don’t take your fancy, there are plenty of exchange traded funds on the ASX that can give you exposure to US or European markets.

The Foolish bottom line

Markets are expecting US and European Central Banks to take action to fix their relative issues. It those actions come about, it could be the pin that popped the Aussie’s balloon, and we could see the dollar plummet. Now’s the time to take advantage.

If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King owns shares in CSL and Flight Centre. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

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 »

asx share price competitions represented by businessmen arm wrestling
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 »

person reading news on mobile phone
⏸️ 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 »