How the Australian dollar affects companies

The Australian dollar has been moving higher against its US counterpart since last week’s decision by the Federal Reserve to raise interest rates. This is even after the RBA’s March meeting warned of a “build-up of risks associated with the housing market” in Sydney and Melbourne.

What does this mean for Australian companies?

To help answer this question, Professor Dirk Baur made a very quick analysis of the impact of the AUD on the financial reports of 4 companies: Evolution Mining, a gold miner, Qantas, an airline, JB Hi-Fi, a consumer goods retailer, and, an online platform for buying and selling cars.

1. Direct exposure to commodities

It’s important to note that the Australian dollar is a special currency because it moves according to the prices of commodities and the shares of commodity-based companies. It’s a “commodity currency”.

This commodity-currency link is especially important for Evolution Mining, which benefits from rising gold prices, and for Qantas, which loses if oil prices rise. Since the AUD rises when commodities rise, an appreciating AUD is good for Evolution Mining and bad for Qantas.

2. No exposure to commodities

The other companies have currency impacts more in line with classical theory. JB Hi-Fi imports much of the goods it sells, so profits are positively affected by a stronger AUD, as imported goods become cheaper.

AUD movements have a similar impact on’s operations in Australia because a lot of cars and parts are imported. However, the company also operates in Latin America and in Asian markets, which makes the overall effect more difficult to measure, as it depends on the correlation of currencies within these regions and between the regions. A higher correlation usually implies a higher currency exposure.

Each one of the above companies tries to minimize currency risk by locking in the price over a certain period using forward exchange contracts and derivatives.

Overall, because the Australian Dollar is a commodity currency, it has a more obvious impact on companies such as Evolution Mining and Qantas than on companies such as JB Hi-Fi and

To read more, follow this link to Professor Dirk Baur’s article on

If you want to learn how to invest in stocks and analyse the market to identify profitable or deadly turning points, contact United Global Capital today for a no cost, no obligation consultation on 03 8657 7640 or email [email protected] to learn about Quality, Value and Trend selection methodology.

For a small yearly fee, learn how to take advantage of the current bull market and stay ahead of the crowd, with access to market news, updates and 20-30 stock recommendations per year in the Australian and US markets!

Previously an exclusive of UGC clients, UGC Research gives you access to the proven strategy used by UGC Securities to identify high return, low risk investment opportunities.

The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs.

Recent stories

Super, death, and avoiding taxes

By Tony Kaye, Senior Personal Finance Writer, Vanguard Australia Having enough superannuation to enjoy a financially comfortable lifestyle in retirement…

Read more

Starting strong: Your 2021 Tech To Do list

In a year where simply keeping the doors open was a challenge for many businesses, finding the funds for tech…

Read more


An annuity, also known as a lifetime or fixed-term pension, gives you a guaranteed income for a number of years.…

Read more

Budgeting 102: Sticking to your budget

Budgeting for a holiday or saving for a deposit? Even the best budget can unravel if the right tools are…

Read more

Virtual trips from your couch

In this modern age travelling is a lot more accessible, we are now able to become those very adventurers we…

Read more