The Australian dollar ($A) has slumped below US90 cents, currently trading at US89.5 cents.
This came after US Federal Reserve said US interest rates will likely be higher by the end of 2015.
Nothing here surprises me. I’ve long been saying the only way for the Aussie dollar is down. It’s what happens when a recovering US economy collides with a stagnant Australian economy.
I’ve already positioned my portfolio to benefit from a falling dollar — it’s chock full of US-quoted equities, complemented by a good smattering of fully franked dividend paying ASX shares, including FlexiGroup Limited (ASX: FXL). On top of that, I hold a healthy cash balance, giving me added flexibility should markets correct. Heck, we’re overdue a stock market correction.
There is a silver lining to the falling Aussie dollar…
It helps our retailers compete with the likes of British online retailer ASOS. One such beneficiary looks to be Solomon Lew’s Premier Investments Limited (ASX: PMV) — its shares jumped 8% yesterday after reporting stellar results, and that’s before the dollar really hit the skids.
It also helps the Reserve Bank of Australia (RBA). Glenn Stevens doesn’t want to cut official interest rates for fear of further fuelling the property bubble. But he does want to help stimulate our stalled economy. A lower Aussie dollar is almost as good as an interest rate cut.
The silver lining could soon turn to gold. Even at US89.5 cents, there’s still only one way for the Aussie dollar — down.
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Bruce Jackson owns shares in BHP Billiton