The Australian dollar climbed over 87 US cents in US markets Friday night, so you can bet on the impact of the currency becoming an issue as we head towards the start of the 2007 annual results season early next month.
The currency ended at 86.12 USc, after reaching above that level.
It had closed at 86.71 USc in Sydney on Friday afternoon, so the rise was almost half a cent.
It was the highest close since February 1989 and the Aussie gained 1.5 per cent against the greenback last week.
The surge in the Aussie came as the US currency fell to a record low against the euro and the lowest level in 26 years against the pound.
The Aussie dollar is up from 79.39 USc at the start of 2007 and a low of 78.28 USc reached in late January.
The currency is up more than 12 per cent from that low and 8.5 per cent since the opening to the year on January 2.
The Trade Weighted Index, which reflects the value of the dollar against all the currencies of our trading partners, hit an all time high of 69.7 on Friday afternoon and will go close to 70 today, if the Aussie remains well above 87 US cents.
Analysts have been factoring in the cost of the rising dollar to June 30, reporting companies and the impact will be noticeable on a wide range of miners from Rio, ERA, Oxiana and Iluka and Woodside, all of which report this week their second quarter and first half production figures.
The impact of the dollar will show up more noticeably in the likes of Iluka, Oxiana and ERA where managements have already made mention of the firmer dollar's potential to retard earnings growth.
The firmer dollar is having a favorable impact on Rio's Alcan bid. It is now$A4.5 billion cheaper than if it had been done in mid-February when the Aussie was trading around 78.30.
If the dollar goes to 90c and Rio locks in some of its currency needs around that level,the total value could fall to just over $42 billion, producing another saving.
Importers such as retailers, will find the rising dollar a benefit.
Woolies, Coles and Harvey Norman have major product importing deals that cut out the middle men and deal directly with overseas producers. GUD and Housewares International will benefit as the cost of their homewares and electrical goods made in China fall.
The margins on some of the new house brands being introduced by Woolies and Coles will rise because many are imported from China, Thailand and Indonesia.
Virgin Blue is finding it a good and a bad influence with bookings rising on its few overseas flights, but holiday bookings and internal travel are not as strong as Virgin would like them to be.
Jetstar is losing money on flights to Japan that it has just taken over from the Qantas international mainline.
Travel-related companies, such as the semi-privatising Flight Centre, are finding the rising dollar is bringing in more business as Australians rush to book overseas travel.
Qantas is finding the higher dollar is cutting costs and filling planes: passengers trying to book out of Australia in the high travel period in December are being wait listed already, five months out.
Building products companies with overseas operations, such as James Hardie and Boral, will produce mixed results.
They are also being hit by the downturn in the US housing sector. Banks and others (such as Harvey Norman, Fairfax and Woolies) will have mixed reports from their investments in New Zealand.
The Kiwi dollar is appreciating against the US, as the Aussie is, but the Kiwi has been losing aground recently against the Australian currency.
The car industry will be hurt by exports of vehicles and parts costing more, while the cost of importing cars is falling for brands like the Toyota Corolla (the best selling model in the country), the Yaris, the luxury brands like Lexus from Japan and the BMW and Mercedes ranges from Germany.
On Friday, Ford raised the prospect of ending the manufacturing of its six cylinder engine here and importing a smaller and more efficient one from overseas. That will cost 600 jobs.
But more importantly, now it is probably more efficient to bring in a new, hi-tech, low-pollution power plant from overseas than to make it here. The high value of the Aussie dollar makes it more economic to import.
