Australian dollar flying high - Aussie tourists to benefit

Australian dollar flying high – Aussie tourists to benefit

Which companies stand to benefit from the higher Australian dollar?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 31, 2012 11:02 am AEST

The Australian dollar has soared against the US dollar, passing $1.05 overnight. Switzerland has announced that it is adding the Australian dollar to its reserves and started buying around 9 months ago.

But it's not just the US dollar that the Aussie is rising against. It's rising against most major currencies.

The Aussie dollar is now buying 85.6 euro cents – up 11% since a year ago, and has risen 6.5% against the UK pound to 66.8 pence, since mid-May 2012.

That's excellent news for Australians heading overseas and Aussie investors buying shares in international companies, or even internationally focused Exchange Traded Funds (ETF), several of which are listed on the ASX and can be purchased through brokers.

The high Australian dollar does have a downside too. Tourism into Australia tends to fall as the dollar rises, which can be tough for local tourism operators, tourist attractions, and Australian businesses dependent on international tourists.

For travel agents booking international flight, the soaring Australian dollar is great for business. The number of Aussies travelling overseas tends to rise and Flight Centre Limited (ASX: FLT) is one of the main beneficiaries. The company's share price has a strong correlation with the AUD/USD exchange rate – a high Australian dollar usually means a higher share price and vice versa.

Other travel agents will also benefit, with Webjet Limited (ASX: WEB), Jetset TravelWorld Limited (ASX: JET) and Corporate Travel Management (ASX: CTD) all likely to see an increase in international bookings, which should equate to higher revenues.

The airlines should also benefit. Qantas Airways Limited's (ASX: QAN) international operations should receive a shot in the arm from the higher Aussie dollar as more Australians head overseas. It should certainly help the airlines purchase planes, as they are mostly bought from US and European manufacturers (well mainly Boeing and Airbus). Not to mention their fuel costs. Qantas's $4.4 billion fuel bill in the last financial year should be helped by the higher Australian dollar, as the company buys its fuel in US dollars.

That said, travellers may have noted that Qantas passes much of its fuel costs onto them as a 'surcharge'. As an example, a one-way flight to London carries a $380 fuel surcharge. The price of Singapore Jet Fuel (what Qantas uses to calculate fuel surcharges) has fallen 11% since March 2012 Whether the company will lower the surcharge due to the lower Jet Fuel prices, remains to be seen.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King owns shares in Flight Centre. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.