Aussie dollar slumps

Aussie hits lowest level in seven months

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 March 4, 2013 3:48 pm AEDT

The Australian dollar has hit a seven-month low today, following a slew of economic data that came in under analyst expectations.

The Aussie, as it is known, fell as low as 101.2 US cents, its lowest level since July 2012.

Building approvals fell against expectations in January, for the second consecutive month. Australia Bureau of Statistics (ABS) data showed the number of buildings approved slipped a seasonally adjusted 2.4%. Economists had expected a 2.8% rise in approvals.

Company gross profits also fell in the December quarter according to the ABS. Seasonally adjusted profits fell 1% compared to the previous quarter, and were down 7.6% compared to the previous year. Business inventories were expected to rise by 0.6% – but failed to live up to expectations, rising just 0.2%.

Rising jobs ads – which suggests falling unemployment, and flat inflation were another two indicators which dampened the Aussie dollar. TD Securities and the Melbourne Institute gauge of inflation shows price pressures are being contained, suggesting the official cash rate will stay at its current level of 3%.

Australian exporters will be hoping that we see further falls in the exchange rate, especially against the US dollar. The majority of Australia's exports are resource commodities – the majority of which are priced in US dollars. For iron ore exporters like BHP Billiton (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group (ASX: FMG) and gold miner Newcrest Mining Limited (ASX: NCM), the falling Australian dollar could be a godsend, increasing their revenues in Australian dollar terms and partially offsetting losses from falling commodities prices.

Foolish takeaway

It's not just our resources companies that will benefit from a lower Australian dollar. Many other Australian companies generate a significant portion of their earnings offshore. A falling Australian dollar will also be good news for them.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in BHP.

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