Staying high: Aussie dollar rallies again

Can it make new highs?

a woman

It’s a great time for Australians looking to travel overseas or shop online at US stores, with the Australian dollar currently buying more than 104 US cents.

Overnight the dollar rallied three quarters of a cent to US 104.2 cents, despite worries about the resources industry, our major export, and a slowdown in our biggest trade partner, China.

It’s hard to believe the Aussie was trading at just US 64 cents back in March 2009. Since that time the currency has taken off and has rarely traded under parity against the US dollar since January 2011.

Any hope of a decline in the value of our currency appears to be futile as the growing status of the Aussie dollar as a safe-haven seems likely to provide support for the currency. Australia’s AAA credit rating, our relatively low level of country debt, relatively high interest rates and the high currency liquidity all add to our safe-haven status.

Lets face it, who wants to earn 0% or 1% on bonds investing in the US when you can get 5% or more investing in Australian term deposits? And it appears not many countries want to invest in Europe, given the current debt crisis that is raging in the region.

The fact that the Reserve Bank of Australia (RBA) has declined to cut official interest rates since June 2012 has added support for the Australian dollar. The RBA is also unlikely to intervene to lower the dollar, despite it remaining persistently high in the face of falling commodity prices.

The most likely direction appears to be upwards against the greenback, with signs that the US Federal Reserve may be closer than ever to further policy easing. With the economic recovery in the US showing little sign of growth, the Fed may want or feel the need to stimulate the US economy. That will have a weakening impact on the US dollar, and is generally viewed as good news for commodities, which tend to trade higher.

For Aussie companies that earn a significant proportion of their revenues overseas, that’s bad news, including Treasury Wine Estates Limited (ASX: TWE) and Aristocrat Leisure Limited (ASX: ALL). Those that can expect to benefit should the Aussie stay high or go higher include travel agent Webjet Limited (ASX: WEB) and airline Qantas Airways Limited (ASX: QAN), as consumers look to travel overseas and make the most of the high dollar.

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 doesn’t own shares in any companies mentioned. 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 »