Whether a higher AUD (Australian dollar) is good or bad for stock prices depends on the type of company and the broader market context. Here’s a breakdown:
Good for some companies:
1. Importers & Domestic-Focused Businesses
A stronger AUD makes imported goods and materials cheaper, reducing costs for retailers, manufacturers, or businesses reliant on overseas inputs.
Consumer companies benefit from lower input costs and potentially stronger consumer purchasing power.
2. Companies with AUD-denominated Debt
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A stronger AUD reduces the relative burden of any foreign-currency-denominated debt (especially if it’s in USD), making financials look better.
3. Travel & Tourism Abroad
Australians traveling overseas get more value for their money, which may boost outbound travel companies and consumer spending abroad.
Bad for other companies:
1. Exporters & Commodity Producers
A strong AUD makes Australian exports more expensive for foreign buyers, potentially reducing demand.
Commodity companies (e.g., iron ore, coal, LNG) earn revenue in USD but pay expenses in AUD, so a rising AUD shrinks profit margins.
2. Companies with Significant Overseas Earnings
If an Australian company earns a lot of revenue overseas (e.g., Asia or the U.S.), a stronger AUD means those foreign earnings convert to fewer AUD, reducing reported profits.
Lauren Hua is a private client adviser at Fairmont Equities.
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