3 shares to profit from the falling Australian dollar 

The Australian Dollar has fallen almost 5% against the American greenback since hitting a 12-month high in September.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Australian dollar is currently buying less than USD$0.77, having fallen from its 12-month high of USD$0.8057 in early September. While a weak domestic currency is not good news for importers, it should benefit Australian companies with significant overseas earnings, exporters, and those with ties to the tourism industry.  

Macquarie Group Ltd (ASX: MQG) generated 62% of its first-half FY2018 earnings from overseas business segments, which includes North America. The group recently announced half-year profit rose 19% on the previous corresponding period, as well as a higher Return on Equity and an increased interim dividend. The popularity of Macquarie’s annuity-style investments continues to grow and are a main driver of growth and increased profitability. According to management, a 10% drop in the Australian dollar will have a 6% increase in group net profit after tax. Macquarie’s share price is up around 10% over the last month. 

Treasury Wine Estates Ltd (ASX: TWE) shares have been on a tear in 2017, up almost 30% in the last 6 months and they recently hit an all-time high. Treasury has vineyards in Australia, New Zealand, Italy and the United States; generating significant overseas revenue as it exports to more than 70 countries.

Exports to China are material to the company’s success, with management expecting to add new customers and reduce lead times through supply chain improvements in FY2018. Treasury trades on a relatively high trailing P/E of 43x, though this is to be expected given the company’s growth prospects and the fact that FY2017 earnings rose 55% on the previous period. 

Qantas Airways Limited (ASX: QAN) is another company that should benefit from a weaker dollar as inbound tourism is therefore likely to increase and Australians have greater incentive to holiday domestically. Shares in Australia’s number one airline are down almost 7% over the last week, but that could represent a buying opportunity for a company expecting to increase underlying half-year earnings before tax by 5.5%-11.5%. It currently trades on a P/E of just 13x.  

Foolish takeaway 

The Australian dollar is currently on a downward trend against most major currencies, following recent weak inflation figures and a federal parliament that could currently be best described as ineffective. The prospect of corporate tax cuts and interest rate rises in the United States will, in my opinion, place further downward pressure on the Australian versus the US dollar. This should result in higher share prices for quality ASX-listed companies with significant U.S. earnings. 

Motley Fool contributor Ian Crane has no position in any stocks mentioned.  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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »