Business Applauds And ASX Stocks To Benefit As The Aussie Hits a 3-Year Low

Getty/JAck Atley

The Aussie dollar hit a three-year low of 0.8756 against the Greenback yesterday before the combination of higher-than-expected inflation and solid Chinese growth data lifted it back above 88 cents this morning.

The last week has seen the falls accelerate as weaker-than-expected employment data last Thursday weighed on sentiment and increased the chances of an RBA cut.

A falling Aussie is exactly what RBA Governor Glenn Stevens wants so that a lower dollar can increase economic activity more evenly across the Australian economy and reduce its recent concentration of growth in mining and mining-related industries.

The primary beneficiaries will be those businesses and their workers who either export or compete with foreign importers which up until recently have been very cheap by historical standards. Think educational institutions trying to attract overseas students, Queensland holidays and Australia’s last remaining motor vehicle manufacturer, Toyota.

The Aussie dollar downtrend continues. Chart:

Governor Stevens’ target of 85 cents, articulated in December, is now within reach and the technicals suggest that a move to 81 or even 80 cents across the course of 2014 is on the cards. Clearly Stevens’ intervention and the fall in the dollar from the high 90’s just three months ago is already paying dividends with business, according to the AFR this morning.

Andrew ­Bellamy, CEO of Australian Defence contractor and builder of fast ships Austal, told the AFR that if the Aussie can fall to 80 cents against the US then its Fremantle shipyard will be as competitive as US shipyards which have the benefit of much lower wages.

A Toyota spokesman also said the exports of Aurions and Camrys would benefit from a lower dollar while Phil Honeywood, national executive director of the International Education Association of Australia, said the lower dollar would also help attracts overseas students.

A lower dollar will also benefit embattled Aussie shareholders who watched the Australian stock market underperform its counterparts in the US and Europe in 2013. UBS analyst Matthew Johnson said company profits will benefit as a result of the lower dollar.

Maybe the ASX might do better than expected in 2014.

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