Importers cheer dollar's strength(1)
Importers are cheering a rally in the Australian dollar that has propelled the currency to its strongest levels against the US dollar in almost a year.
The Aussie dollar, which has soared 35 per cent since the end of October, has consolidated gains to trade above the 80 US-cent mark since the middle of July. On Friday, the currency climbed to 84.71 US cents - a gain of one US cent in 24 hours - after comments by the Reserve Bank Governor Glenn Stevens suggested interest rates are headed higher. The morning it was buying 82.96 US cents.
"The fact that (the dollar) has stabilised well above its long-term home of above 70 US cents, has meant certainty for importers," said Travelex Melbourne head of dealing Bernie Tuck.
"It means they can sit there with a little bit of comfort while it takes a bit of a rest above 80 US cents."
A stronger dollar benefits retailers who depend on imported goods and airlines by making overseas travel more attractive and fuel costs more affordable. Miners, however, can see demand for their resources tamped by a stronger dollar.
Since March, the dollar swung from the low 60-US cent level, which sapped the profits of importers, to above 80-US cents, which has made Aussie exports less attractive.
The local currency has been fueled in part by the sharemarket's 38 per cent rally since early March, as well as expectations the Reserve Bank will start raising rates in the next 12 months as Australia's economy proves more resilient than forecast at the start of the financial crisis.
RBA governor Glenn Stevens' testimony to the House of Representatives sent the dollar jumping nearly one-third of a US cent, after he described the current 3 per cent official interest rate level as an "emergency setting."
Export woes
Exporters and those companies competing against imports, however, have not been helped by the dollar's persistent strength.
The lower value of the Aussie at the beginning of the year was beneficial to exporters by making locally produced products attractive on global markets.
The ensuing rally has dashed their competitive position, however, Mr Tuck said.
The rise of the dollar has "obviously impacted their revenues coming in if they weren't hedged in the low 60s," said Mr Tuck.
"Many exporters are hedged, but this rally up is obviously rallying the wrong way for them," he said.
Wine sales
For exporting companies which don't hedge currencies, or purchase them at lower rates to lock in an advantageous exchange rate, they have little choice but to wait for the dollar's value to shift.
Pettavel Winery winemaker Peter Flewellyn said the rising dollar is affecting sales to the UK, where British wine-drinkers are "moving back to the old world" buying French and Italian wines as the cost of Aussie wine rises.
Earlier this month, the Australian dollar hit a 12-year high against the pound. It was recently buying 50.9 pence.
Currency changes had never been an issue for Pettavel before, Mr Flewellyn said, because the wine's premium $18-$42 price range is not generally sensitive to price fluctuations.
But as the fluctuations become larger, there's more and more impact going up the price scale, he said.
Pettavel, which exports to the US, UK, China and Europe, said Chinese importers in particular are waiting for the Aussie dollar to drop in value before paying for their wine in full.
"We invoice in the Australian dollar and so (customers) may pay a deposit to hold the wine, but we won't ship until it's 100 per cent paid up front."
"So they just hold off until the currency is in their favour and then transfer the money across."
Lately, Chinese wine buyers have even requested the winery set up bank accounts in China to facilitate easier payments for the wine, he said.
"It's something we haven't seen before," Mr Flewellyn said.
