The Australian dollar could fall below US 60 cents.
That's the opinion of analysts from the Australia and New Zealand Banking Group. Although the currency is already trading below their fair value estimate (US 72 cents) at just US 70.79 cents, they believe the negative overshoot will last for a considerable period of time with a fall below US 60 cents seen as a possibility, according to The Australian Financial Review.
Analysts from each of the remaining big four banks agree that the dollar is headed below US 70 cents within the next six months. Meanwhile, AMP Capital's chief economist, Shane Oliver, agrees with ANZ with the SBS quoting him as saying "The Australian dollar is expected to fall to 60 US cents in the next year or so, with the risk that it will go even lower."
Of course, there is plenty of bearishness surrounding the dollar at the moment. That bearishness is mostly associated with the perceived headwinds facing the local economy – including a decline in investing income, a high unemployment rate and a rapid slowdown in China – while expectations of an interest rate rise in the United States is also attracting foreign investment away from Australia.
While a weaker dollar could certainly dampen your international holiday plans, it does bode well for the Australian economy in general. A lower dollar will boost our exports by making them cheaper to foreign buyers which should benefit the miners (amongst various other companies) whilst also boosting tourism from overseas.
There is also a great opportunity for local investors to profit from the trend by allocating capital to companies that generate a significant portion of their earnings internationally. Companies to consider include Cochlear Limited (ASX: COH), ResMed Inc. (CHESS) (ASX: RMD) and Westfield Corp Ltd (ASX: WFD).
Indeed, by constructing a portfolio that could benefit from favourable currency movements could help you achieve market-beating returns, which is especially important for investors in this volatile sharemarket environment.
