Where is the Australian dollar headed next? It wasn't so long ago that our currency was approximately worth the same as the US Dollar, and investors were keen to benefit from what was an obvious aberration.
Now the Aussie dollar is buying $0.75 US Dollars, but if US interest rates are rising, our interest rates are still falling, and/or we're heading into a recession as some predict, our dollar could be set for another fall. Here are 3 possible ways to benefit:
Cochlear Limited (ASX: COH)
This hearing aid developer and manufacturer earns more than 90% of its revenues and has 50% of its costs in currencies other than the Australian Dollar, which makes it an ideal way to gain exposure to a falling AUD. Unfortunately, at today's prices, much of that benefit already appears to be priced in, and Cochlear earns in a diverse range of currencies which makes it a less clear beneficiary.
ResMed Inc. (CHESS) (ASX: RMD)
ResMed's Australian listing is a CHESS depository instrument for the common stock listed on the New York Stock Exchange (NYSE). Every 10 ASX ResMeds is the equivalent of 1 ordinary share on the NYSE. With the common stock priced in US Dollars and the dividends paid in US Dollars (and converted to AUD for CHESS depository holders), ResMed is a very clear way to benefit from a decline in the Australian Dollar against the US Dollar – both your dividends and share prices will increase in value.
Macquarie Group Ltd (ASX: MQG)
Global investment bank Macquarie Group is another effective way to benefit from a weaker Australian dollar against a variety of currencies including the USD and the Euro. The sensitivity analysis in Macquarie's latest annual report shows that a 1% decline in the Australian Dollar against the US Dollar, Pound, Canadian Dollar, and Euro, would result in a $77 million, or 3.7%, increase in profit after tax.
