Overnight, the Australian Dollar ($A) (AUDUSD) jumped above 80 US cents. But that didn’t stop shares of ResMed Inc. (CHESS) (ASX: RMD), Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL) moving higher.
AUD on the rebound
Over the past six months, the Australian Dollar has risen from a low of 73.40 US cents to above 80.50 US cents. That might not sound like much but it is a near 10% rebound.
For Aussie importers, it is good news because it means they can buy more merchandise with their Australian dollars and still make a decent profit.
Exporters, however, would be feeling the pinch. So would local investors who invest abroad.
For example, I invest in US shares like Apple and Alphabet, the owner of Google. The 10% rise in the Australian Dollar is eating away at my investment returns.
The latest rise in the Australian dollar is partly attributable to concerns out of the US, with some pundits saying the Federal Reserve will not raise interest rates again this year.
I must admit the direction of the Australian Dollar caught me off guard. I was expecting a lower currency by year’s end, not a higher one.
However, I continue to believe that investing abroad in 2017 is a good idea. Our economy is ticking along nicely according to the RBA, but that may not always be the case. And when the local economy takes a turn for the worst, having overseas exposure lowers an investment portfolio’s overall risk.
That’s not to mention the investment opportunities which lay outside our shores. Investing abroad can be a great move from a growth perspective, with the world’s biggest and best companies listed on overseas stock exchanges.
But if you do not want to open an international stock broking account you can invest in ASX companies that generate most of their business overseas.
For example, CSL, ResMed, and Cochlear earn the majority of their sales overseas. They are also high-quality companies. However, their shares do not come cheap, so you may have to exercise some patience before buying in.
With the recent rise in the Australian dollar, investing abroad in US Dollars might be worth considering in 2017. Although I’m surprised and it hurts to see the AUD above 80 cents, I’m actively considering putting more capital to work in my US stock broking account.
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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Alphabet (A shares), Alphabet (C shares), and Apple. 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.