In-case you missed it, the Aussie dollar quietly tip-toed past the US80c mark a few weeks ago hitting a 2 year high and is up 10c from the 71c low last December. The recent and unexpected surge has triggered a raft of changes in analyst’s predictions and a sell-off in stocks that are exposed to US dollar earnings. There are a few factors that have contributed to the recent rise such as rumours that the RBA may look to hike sooner rather than later, a recovery in iron ore and oil prices and a solid set of employment figures. The greenback has also come off a little and helped push the Aussie a touch higher. So what does it all mean, is this a good thing or bad thing? I know what you’re all thinking, “beach, bikinis and sunset? Time to travel?” It sure is. A soaring Australian dollar makes it the perfect time for an Aussie travelling abroad. Anywhere with the exception of the EU. I recently came back from the Spanish Balearic islands and the Euro/AUD spot rate was almost the same as it was a year ago. This makes the EU still a pricey place for Australians. Travellers visiting the US and other US denominated countries will have greater buying power than previously. It’s also a great time to also change your money over from USD to AUD that’s if you believe the currency won’t stay high for too much longer. The consensus among the broker world is that the Australian dollar will continue its steady upward march on solid economic data, perhaps to US84c. Then it will fall as the US Federal Reserve starts to increase its rate hikes throughout the year. But of-course this is all rolling a dice type predictions. No one really knows where a currency will go, there are just too many factors that come into play. But let’s for a moment assume that the dollar continues to march on and settles around the US85c-US90c mark. A 10 cent increase in Australian dollar will initiate a shift in dynamics driving markets and stocks across the country. The immediate impact will be on companies that have a high percentage of US dollar earnings. As the Australian dollar rises it will eats away at profits when they are converted back from USD to AUD. On the flip side, a higher dollar means every Australian is effectively richer. That means a stronger dollar buys more in imports. A rising currency also reduces inflationary pressures as the prices of imports decline in Australian dollars. The basic message, a higher currency hurts exporters but benefits importers. If you look at the Aussie dollar chart, you’ll notice that the Australian dollar has been in a steep decline since 2012 having fallen from US$1.10 to US70c in 2016. Our economy is positioned to take advantage of a low dollar exchange rate which helps our exporters who ship products offshore at a cheaper price that their global counterparts. Whilst the rise in the Aussie dollar isn’t a game changer, especially for US earnings companies, it does however, put pressure on the economy. For example the:…

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