The only real surprise from today's interest rate decision is how the Australian reacted with our currency rallying around half a cent to US79 cents.
The Reserve Bank of Australia (RBA) would be alarmed. After all, its move to cut the interest rate by 25 basis points (0.25 of a percentage point) to a fresh record low of 2% largely stems from its desire to see the Aussie fall to somewhere under the US75 cent mark.
In its statement accompanying the rate decision, the RBA even said: "Further depreciation seems both likely and necessary". The board shouldn't feel bad. Currencies are one of the hardest asset classes to forecast.
The question many investors are asking is whether the Aussie's jump is a short-term aberration.
However, the more important question is whether this is as good as it gets for Australian companies earning US dollars.
I fear the answer is "yes" as getting the Aussie below US75 cents appears to be drifting further out of reach for the almighty RBA. This could give the bank further pause for thought before it cuts rates again.
If our dollar holds on to the gains, or God forbid even appreciates, it will impact valuations of some of our favorite stocks that have substantial US currency exposure.
I am talking about the likes of blood products maker CSL Limited (ASX: CSL), sleep disorder treatment device company ResMed Inc. (CHESS) (ASX:RMD), engineering contractors Worleyparsons Limited (ASX: WOR) and Cardno Limited (ASX: CDD), and resource stocks with large Australian based operations like Santos Ltd (ASX: STO).
But the ones that will be most negatively impacted are those that are fighting macro headwinds because they especially need a weaker Australian dollar to alleviate pressure on their business.
This means we don't need to be as worried about healthcare stocks. The ones that will be sweating the most are Worleyparsons, Cardno and maybe even Santos if the oil price doesn't sustain its recent recovery.
You can probably put higher cost iron ore producers like Fortescue Metals Group Limited (ASX: FMG) into the same basket.
Conversely, this could be the time to increase your exposure to Australian dollar earners that have been disadvantaged by the falling local currency.
Retailers come quickly to mind as they usually import US dollar priced goods, and again, it's those that are under pressure and lack pricing power that have the most to gain from a firmer Aussie.
Stocks that fit into this category include Myer Holding Ltd (ASX: MYR) and Specialty Fashion Group Ltd. (ASX: SFH).
Having said all that, who knows where the Australian dollar will be tomorrow. Not even the RBA has an answer for that.
