The Australian dollar is holding at a more than one-year high and it could be heading even higher. This will create winners and losers on the S&P/ASX 200 Index (Index:^AXJO).
The Aussie battler jumped over US71 cents and is holding around its highest level since April 2019.
This means our dollar has surged by around 24% since the COVID-19 low in March when it plunged to under US58 cents.
Is the Aussie heading to US73 cents?
The fightback may not be over. Macquarie Group Ltd (ASX: MQG) believes it can climb higher in the near-term.
"With Australian yields higher than the US, we think rising commodity prices will continue to support AUD," said the broker.
"A model of commodity prices and AU/US interest rates suggests the Australian Dollar should already be closer to [US]73 cents."
Losers from the stronger A$
If the Aussie continues to build on its recent gains, this will create a headwind for larger cap stocks as most of our largest companies are significantly exposed to the US dollar.
These includes our high-flying tech stocks like Afterpay Ltd (ASX: APT) and healthcare giants like CSL Limited (ASX: CSL).
However, there are exceptions among the ASX 200 stocks. Macquarie believes the weakening greenback will provide a tailwind to value stocks.
ASX value stocks are winners from US dollar weakness
Value stocks are those that trade at a discount to the market and to historical averages for their respective sectors. Despite spots of outperformance, this group is largely underperforming growth stocks, which trade on high price-earnings (P/E) multiples.
"The value rally in May/June corresponded with a period of US dollar weakness," said Macquarie.
"As the weak USD partly reflects rising risk appetite, we prepared an updated list of Stocks to buy in the value rally.
"we target stocks where FY22 earnings have been cut since the pandemic, and the stock has also de-rated (we call them decliners)."
Best ASX picks for value
Three ASX sectors stick out. They are real estate, banks and industrials. The stocks in the property space the broker believes will outperform in the next value rally include the Stockland Corporation Ltd (ASX: SGP) share price, Lendlease Group (ASX: LLC) share price and GPT Group (ASX: GPT) share price.
In the industrials sector, Macquarie's picks are the Worley Ltd (ASX: WOR) share price, Incitec Pivot Ltd (ASX: IPL) share price, Emeco Holdings Limited (ASX: EHL) share price and Genworth Mortgage Insurance Australia (ASX: GMA) share price.
The National Australia Bank Ltd. (ASX: NAB) share price is the only ASX bank to make the list.
