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AUS/USD exchange rate direction

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AUS/USD exchange rate direction

Dear MM, A question for the end of week. MM is leaning to the USD declining, and hence the big question is what will the exchange rate with the AUD against the USD do, particularly if there is another boom on resources stocks - just how strong could the AUD become (ten years ago it was at parity)? My nagging thought is should I lighten down on US shares and bring more funds home? Thanks James

Answer

Hi James,

This is a fascinating question, especially after the excellent performance by the US Tech Sector which for Australian investors has been magnified by the more than 15% appreciation in the $US against the “Aussie Battler” from its 2021 high – assuming no FX hedging. A few points to consider:

  • We are bullish commodities and the $A over the coming years, a 10% bounce in the $A wouldn’t surprise but fortunes have been lost trading the vagaries of currencies.
  • Alternatively, there is a solid argument for investing in the stocks you like, both home & abroad, and if the currency risk feels too large, consider hedging the currency with an ETF.
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Australian Dollar ($A)
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