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Three reasons the falling Aussie dollar is GOOD news

The S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has fallen some 6% in the last 30 days. Shares of giants like BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) have fallen hard as well, by some 8.5% and and 5% respectively.

Alongside the share market slide, the Australian dollar has fallen, and to hear most commentators describe the situation, such a fall is most definitely a bad thing, as it raises the price on overseas travel, prices in the retail sector, and petrol prices.

What’s less well known are the benefits posed by a falling dollar. Here are a few ways that the lower Australian dollar is good for the Australian economy. In no particular order…

1. The lower dollar boosts the repatriated profits of companies with significant overseas operations.

2. Rising import prices will bring some relief for Australian-based manufacturers.

3. A lower dollar makes export prices more attractive for overseas buyers, boosting our domestic output.

The bottom line for investors

Recognising these key positive effects can help us keep our heads as long-term investors even as the ASX continues to slide. It can also be a source of courage for those of us who are using the share market lows as a buying opportunity.

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Motley Fool contributor Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

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