{"id":8214,"date":"2023-10-23T12:18:17","date_gmt":"2023-10-23T01:48:17","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/how-the-aussie-dollar-moves-your-investments\/"},"modified":"2023-10-23T12:18:17","modified_gmt":"2023-10-23T01:48:17","slug":"how-the-aussie-dollar-moves-your-investments","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/how-the-aussie-dollar-moves-your-investments\/","title":{"rendered":"How the Aussie dollar moves your investments"},"content":{"rendered":"
It has been a wild ride for the Australian dollar since the Covid-19 pandemic struck and that could mean good news or bad news for your investment portfolio.<\/strong><\/p>\n In March 2020 the Aussie dipped below US58 cents for the first time in a decade. Since then, a high of just over US77 cents in 2021 has been followed by a rollercoaster ride, mostly downhill.<\/p>\n In October 2022 the dollar plummeted to US61.9 cents, bounced its way back up to US71.3 cents in February this year but by mid-August it had slipped to a nine-month low at under US64 cents.i<\/sup><\/p>\n Many analysts agree that further falls are on the cards with some even predicting the dollar could fall to as low as US40 cents within five years.ii<\/sup><\/p>\n Given any currency\u2019s susceptibility to changing economic conditions both at home and overseas, the Aussie has had quite a bit to deal with lately.<\/p>\n Rising interest rates can boost the Australian dollar by making us more attractive for foreign investors, providing our rates are rising ahead of the US and others.<\/p>\n If foreign investors buy more Australian assets because they can get a bigger return on their investment, more money flows into Australia which increases demand for Australian dollars. And if investors hold more Australian assets than overseas ones, less money leaves the country, decreasing supply. So, increased demand and decreased supply see the Australian dollar rise.<\/p>\n While the Reserve Bank of Australia (RBA) has increased rates by 4 per cent in Australia since May last year as it battles to get inflation under control, rates have also been rising in the US.<\/p>\n The US Federal Reserve has undertaken its most aggressive rate-rising cycle in 40 years with rates now at a 22-year high and signs of further increases likely. This has put pressure on the Australian dollar, narrowing the difference between the US and Australian rates, meaning foreign investors will look for better returns elsewhere.<\/p>\n The value of the Australian dollar is also affected by changes in economic conditions as well as rises and falls in other financial markets. For example, in August news that the unemployment rate had increased slightly and an easing in wage price growth led to speculation that the RBA would put a hold on rates, putting a dampener on the Aussie.<\/p>\n Also affecting the dollar was a decline in US share markets in August, confirming the typical pattern of falls in the Australian dollar when prices in equity markets drop.<\/p>\n Meanwhile, the performance of China\u2019s economy plays a significant part in Australian dollar movements. China is currently battling soaring unemployment, particularly among young people, falling land prices and a housing crisis, among other ills.<\/p>\n As Australia\u2019s largest trading partner, both in terms of imports and exports, any slowdown in China means lower sales of our commodities and other goods and services and less investment in property and business.iii<\/sup><\/p>\n There are advantages and disadvantages of a falling Australian dollar. On the plus side, our exports will be more competitive because our customers will pay less for our goods and services compared with those produced overseas. Conversely, imported goods will be relatively more expensive.<\/p>\n There could also be an increase in tourism \u2013 the cost of travel in Australia will be cheaper for those coming from overseas. Unfortunately, those planning an overseas trip will need to find a significantly greater pile of Australian dollars to pay for airfares, accommodation and shopping.<\/p>\n For investors, it is a useful exercise to review the currency\u2019s effect on your portfolio.<\/p>\n For example, if you\u2019re invested in Australian companies that rely on overseas earnings, look at how they handle their exposure to the currency risk. A lower dollar is good news for those with overseas operations and those that export goods. On the other hand, those that need to buy in components or products from overseas may suffer.<\/p>\n In any case, have a chat to us to look at the best way forward in these uncertain times.<\/p>\n i https:\/\/tradingeconomics.com\/australia\/currency<\/a><\/span> Important: This provides general information and hasn\u2019t taken your circumstances into account. It\u2019s important to consider your particular circumstances before deciding what\u2019s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. <\/span><\/span><\/p>\n Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents\/information contained within the linked site(s) accessible from this page.<\/span><\/span><\/p>\n The post How the Aussie dollar moves your investments<\/a> appeared first on MLC Contemporary<\/a>.<\/p>\n<\/div>\n<\/p>\n
What\u2019s driving the dollar?<\/h3>\n
Changing economic conditions<\/h3>\n
How the dollar affects us<\/h3>\n
ii https:\/\/www.news.com.au\/finance\/markets\/australian-dollar\/aussie-dollar-in-free-fall-amid-bloodbath\/news-story\/929165d65db4dc7d8a97bc7b27b5ab0d<\/a><\/span>
iii https:\/\/www.aph.gov.au\/about_parliament\/parliamentary_departments\/parliamentary_library\/<\/a><\/span><\/p>\n