Although the Australian dollar has appreciated in value during the last couple of weeks due to weakness in the U.S. dollar, I expect these gains to be short-lived.
When President-elect Donald Trump finally lays out his fiscal plans, I believe they will cause the U.S. dollar to strengthen again and push the local currency lower.
If he follows through on his pro-growth election promises I expect they will cause inflation to leap, potentially resulting in the need for between three and four interest rate rises from the US Federal Reserve in 2017.
In light of this I wouldn't be surprised to see the Australian dollar falling as low as 65 U.S. cents by the end of the year.
Whilst this would be bad news for importers like Nick Scali Limited (ASX: NCK) and Reject Shop Ltd (ASX: TRS), it should be a boost for the following two companies which generate a significant percentage of their sales in the United States:
Cochlear Limited (ASX: COH)
In FY 2016 approximately 45% of this implantable hearing solutions provider's sales were generated in the Americas region, with the United States accounting for a large proportion of this. During the year U.S. sales grew 16% thanks to a 10% lift in cochlear implant unit sales. The good news is that thanks to ageing populations in the U.S. and around the world, I believe Cochlear will continue to see demand for its products increase for the next few years at least. With demand increasing and the company likely to benefit from currency tailwinds, in my opinion, Cochlear could be a great buy and hold investment.
Nanosonics Ltd (ASX: NAN)
Earlier this week this infection control specialist reported record half-year sales of $36.1 million, equating to a massive 131% increase over the prior corresponding period. Almost all of these sales were generated in the United States where its ultrasound probe disinfection system continues to win market share. As the system is vastly superior to anything else on the market, I believe it will continue to win market share over the next few years. If the Australian dollar weakens as I expect it to, then Nanosonics' Australian-reported profits are likely to benefit greatly from the exchange rate.
