How you can take advantage of lower interest rates and a stronger Aussie dollar with these 7 stocks

Take advantage of lower interest rates and a stronger Aussie dollar with these 7 stocks

Sometimes the investment opportunities already in front of us can give us decent returns.

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published April 22, 2014 3:14 pm AEST

The Aussie dollar is starting to move towards parity with the US$. Usually when a currency rises, it is because the domestic market is strong and economic growth causes inflation, which pushes up interest rates. The higher interest rates can attract forex traders and investors seeking a better return on investment.

Weaker economy, stronger currency

Yet a weak US$ is creating a stronger Aussie and interest rates are kept low by the RBA not wanting to suffocate a slowly growing economy with higher interest rates. Some are calling for higher interest rates to stave off an uncontrolled property boom, but the rest of the economy is not so booming itself.

Domestic consumer spending is key

Chinese commodities demand has normalised after a surge in 2010-2012, so we can't expect mining to do the heavy lifting. It has to be the domestic consumer market now. This is going to keep interest rates lower for longer until the economy expands to a certain point. Even the jobs market is a little shaky despite a slight tick down in unemployment last month.

How to benefit from this situation

Businesses can expand stores and facilities easier with low interest rates. With a higher Aussie, the importers stand to benefit from lower imported goods costs. Retailers of household goods and personal items like JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and Super Retail Group Limited (ASX: SUL) could gain from this scenario.

Fashion retailers who import clothing also get a tick up in potential earnings, so Premier Investments Limited (ASX: PMV) with its number of brand names like Just Jeans, Portmans, Peter Alexander and JayJays could possibly add to its strong first-half results.

With more money in customers' pockets and a strong Aussie giving more purchasing power overseas, Flight Centre Travel Group Ltd (ASX: FLT) could keep advancing on higher earnings. Webjet Limited (ASX: WEB) and Wotif.com Holdings Limited (ASX: WTF) could see more travel reservations business as well.

Foolish takeaway

Sometimes it is the investment opportunities that are already in front of us that can give us decent returns. You may not need to speculate in lesser known companies with spotty earnings histories to achieve your financial goals.

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