The Australian Dollar (A$) (AUD) has fallen 1.5% in around 24 hours to trade at just 75.4 US cents.
On the sharemarket, the QBE Insurance Group Ltd (ASX: QBE) share price, CSL Limited (ASX: CSL) share price and Computershare Limited (ASX: CPU) share price have rallied.
The Australian dollar, or ‘Aussie‘, is suffering following the release of poor Australian economic data and rising speculation that the USA’s Federal Reserve will raise interest rates later this month.
In Australia, the weaker-than-expected trade surplus whipped currency traders into a frenzy, selling the Aussie lower.
Winners and losers
The QBE share price, CSL share price and Computershare share price are dancing to the beat of a lower Australian dollar, since each of the companies generate bucket loads of cash overseas, particularly in the US. Hence, a stronger USD means more AUD profit — for no extra work. These three ASX blue chips would be the winners from a lower Aussie.
On the other hand, we have companies dependent on a higher AUD taking a bath. Worst still, gold stocks are losing their shine because the global outlook is once again looking rosy. At the time of writing, the Newcrest Mining Limited (ASX: NCM) share price and Northern Star Resources Ltd (ASX: NST) share price are down 2.6% and 4.2%, respectively.
What happens next?
If higher US interest rates are on the cards for the rest of 2017, it will most likely make debt more expensive for Australian businesses — it increases interest rates. And if the Australian dollar continues to fall, it means even higher interest rates again.
This is especially true for companies and trusts in the real estate market, where movements in debt can have a profound effect on their profit. The S&P/ASX 200 A-REIT (INDEX: SPJ) (ASX: XJO), which includes Australia’s top real estate trusts, is down 0.5% today — and 7% over the past six months.
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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.