Well, you can now add copper to the long list of commodities that are tanking. Copper is Australia’s fifth largest mineral export and it sucked the Aussie dollar down by one US cent to just under US81 cents when the brown metal fell to five-year lows.
With the Australian economy driven so much by the resources industry, this could be the move that tips the scale and finally sends the Aussie dollar back under US80 cents.
Copper 5-year spot price chart
If you are planning to take a trip abroad, don’t forget to pack more money. Since May 2013 when the Aussie was at parity with the US dollar (US100 cents), your cash has lost about 19% in value. Buying online from overseas websites? Your GST-free savings advantage on price is long gone.
And the Aussie slide may not stop there.
Senior currency strategist Elias Haddad at Commonwealth Bank was quoted in The Australian stating the Aussie is tipped to hit US73 cents by June.
Australia dollar / US dollar chart
Source: Google Finance
Currencies always go up and down, but rapid and wide fluctuations can cause economic problems as well as big advantages. In any market upset or worry, just repeat the Foolish mantra for inner peace and investing guidance-
Who gains? Who loses?
1) Australian exporters and companies that receive revenue in foreign currency (in this case US dollars) have the Aussie on their side.
2) Indirectly, domestic retailers could get a boost in sales from store and online purchases that previously would have gone to foreign companies.
Here are two such companies I want to highlight.
— ResMed Inc. (CHESS) (ASX: RMD) is a leading manufacturer of breathing aids and respiratory devices with over half of its revenue generated in the Americas. In the last twelve months the stock is up about 42% thanks in part to new product lines that incorporate wearable and contactless tech to monitor and analyse breathing and sleeping patterns.
It is developing products and apps with more mainstream appeal by working with Nintendo and Apple for the quickly expanding e-health technology trend. Trading at 27 times earnings, it may be high for the forecast growth at this time. Watch for a better entry price on a pullback.
— JB Hi-Fi Limited (ASX: JBH), the electronics retailer, hasn’t released Christmas sales figures yet, but a combination of low interest rates and low petrol prices giving shoppers more disposable income may give JB Hi-Fi a revenue boost as well. A low Aussie dollar may divert more purchases away from overseas online retailers and channel them towards domestic retailers like JB Hi-Fi. Harvey Norman Holdings Limited (ASX: HVN) suddenly shot up 6.6% in share price on Wednesday, so could JB Hi-Fi follow suit?