Australian dollar strengthens
FOREIGN currency is in the news again, with the Australian dollar strengthening against the American dollar.
Having a strong dollar may make you feel good, but it is important to understand that currency movements are a double-edged sword.
Exporters receive less as our dollar strengthens, but at the same time imports and overseas holidays become cheaper.
A rising Australian dollar also means the value of your international investments may fall. The fall should be a temporary one because currencies do fluctuate between wide bands, but it is a good time to remind yourself there are still good reasons to have part of your portfolio in international assets.
Our stock market represents less than 2% of total world stock markets and there are many industries such as pharmaceuticals, aircraft building, and heavy engineering that do not exist in Australia. Also, the economic cycles in various countries are often in different phases, so investing internationally gives you the chance to catch the up-cycles in each country.
Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.