If the Australian Dollar (A$) (AUDUSD) plunges below 70 US cents in 2017, I’ll run the ruler over Altium Limited (ASX: ALU) shares, Cochlear Limited (ASX: COH) shares and CSL Limited (ASX: CSL) shares once again.
Will the Aussie dollar (AUD) plunge in 2017?
As can be seen in the chart above, the Aussie dollar has been falling since around early 2013.
It can be tough to understand currency markets. But if you only remember one thing about currencies it should be this: the country with the improving economy will generally have a stronger currency.
Since 2013, the Australian economy hasn’t done much. We grew, of course. But not as much as we have historically. It’s been around 26 years since our last recession — incredible.
However, there were fears last year that we may fall into a ‘technical recession’, which happens when a country’s output or GDP falls for two quarters in a row. However, it appears that China’s infrastructure spending once again came to the rescue mid-last year, pushing commodity prices like coal, iron ore, zinc and aluminium higher and higher.
While all of this has been happening, the U.S. economy has been strengthening. Fresh from its helicopter money and interest rate binge, which saw trillions of dollars poured into the banking system, the U.S. economy has been made great again.
So what we have is the Aussie dollar being pulled lower by a stronger U.S. economy and lacklustre Aussie economy.
If I were to dust off my crystal ball, I’d say the Aussie dollar will end the year lower than where it is today. I doubt it will plunge, but with interest rates set to rise in the US, I think more money will make its way across the pond.
3 ASX shares to benefit from the AUD
If the Aussie dollar does in fact fall, there will be some companies that benefit over time. Companies like Altium, Cochlear and CSL are listed on the sharemarket here in Australia but they generate most of their business overseas. That means a lower dollar will boost the performance of their overseas businesses when it is converted back to AUD.
Altium is a technology business specialising in printed circuit boards (PCBs), Cochlear is the renowned biotechnology company and CSL is Australia’s largest healthcare business.
If the Aussie dollar falls, I’ll be running the ruler over these three ASX shares.
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The Motley Fool Australia owns shares of Altium. 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.