Concern over the rising dollar

The Australian dollar is trading at its highest level in 4 months, as it once again approaches parity with the US greenback. This is causing concern amongst manufacturers, exporters and tourism companies.

Treasury Wine Estates (ASX: TWE) and Qantas (ASX: QAN) are amongst the companies that are cautious of the volatile currency, particularly after the dollar’s wild activity yesterday. It rose as high as US97.59c and fell as low as US96.35c. Qantas’ chief executive Alan Joyce, stated that the dollar could have a “major impact” on his company, especially considering its effect on fuel prices.

Meanwhile, despite recent strength due to strong commodity prices and increased production figures, resources giants including Fortescue Metals Group (ASX: FMG), Rio Tinto (ASX: RIO) or BHP Billiton (ASX: BHP) could also begin to feel the effects, as their product becomes more expensive for overseas customers to purchase.

Foolish Takeaway

It’s anybody’s guess as to how long the dollar will remain strong compared to the US currency, highlighting the need for companies to continue to focus on increasing productivity and reducing costs. In the meantime, investors should be on the lookout for attractive buying opportunities should shares begin to reflect the pain caused by the exchange rate.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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