The Australian Dollar (A$) (AUDUSD) is up 2% this month to over US 79 cents.
Is the Australian Dollar (A$) headed above 80 US cents?
I have been pretty negative on the Aussie dollar over the past few years. Meaning: I think it will fall.
I don't — and won't — try to make money from a rising or falling AUD. I'm not a currency trader.
But I know that over time currencies tend to gravitate towards the country with the stronger economy. The country with higher interest rates and lower unemployment.
By recognising this, savvy long-term investors can take advantage of momentary currency weakness to transfer their investment monies into the foreign currency.
That's why 90% of my investment portfolio is in US dollars, held in my optionsXpress brokerage account.
(Note: I do NOT receive anything for saying that I use optionsXpress)
For example, I used strength in the Aussie dollar last year to buy shares of technology company PayPal; US banking heavyweight Wells Fargo and Twitter Inc.
Then, I bought more US dollars earlier this year. I used the cash to buy shares of Amazon.com and Berkshire Hathaway, Warren Buffett's company.
Anyway, back to the currency…
I have been more than happy to take my Australian dollars, transfer them to US dollars in my brokerage account and buy shares of these great companies.
Why?
Firstly, if you don't have more than 30% of your wealth overseas I think you are doing something wrong. The Australian sharemarket was just 1.5% of the world's total the last time I checked.
So, believe me, or not, the evidence states that it is less risky to invest overseas.
Secondly, take a look at the Aussie economy and ask yourself whether or not our 26+ years of nonstop economic growth can continue. Remember, currencies generally — over time — gravitate towards the stronger economy.
Just ask Zimbabwe.
Finally, even if I get it wrong and the Australian dollar goes higher (which would be 'bad' for me — because my money is in US dollars), what am I left with?
Shares in some of the biggest and best companies on earth?
It could be worse.
