Which ASX shares benefit from a strong Australian dollar is an important question for investors betting on a stronger AUD.

The currency has done a lot of work over the past year.

It buys near 72 US cents, according to the Reserve Bank’s daily exchange rates.

Twelve months ago, it bought around 65.5 US cents.

That is a move of roughly 10%.

Why the currency matters for ASX shares

The mechanism is relatively straightforward.

Companies that import goods and sell them here pay less for their stock.

Companies that sell in United States dollars and report in Australian dollars bring home less.

The Reserve Bank’s commodity price index shows how large this effect has become.

Over the year to August, the index rose 15.5% measured in special drawing rights but only 5.8% measured in Australian dollars.

Roughly ten percentage points of a true commodity upswing has been eaten by the currency.

The Reserve Bank has raised the cash rate three times in 2026, to 4.35%, and held it there in August.

Its August statement made the connection explicit.

Despite depreciating since the May Statement, the Australian dollar remains higher than at the start of the year, consistent with the tightening in monetary policy in Australia compared with other economies.

Wesfarmers: The importer’s advantage

Wesfarmers Ltd (ASX: WES) is one of the clearest domestic beneficiaries.

Kmart and Bunnings both source heavily from Asia in United States dollars.

A stronger Australian dollar lowers the landed cost of everything on the shelf.

FY26 revenue rose 3.4% to $47.3 billion, with net profit after tax was up 8.3% excluding significant items to $2.87 billion.

Bunnings earned $2.46 billion before tax on revenue of $20.4 billion, while Kmart Group lifted earnings 6.0% to $1.11 billion.

The important nuance came from Kmart Group managing director Aleksandra Spaseska on the results call.

From a fuel and an ocean freight perspective, it is an inflationary environment. The strengthening of the Australian dollar plays a mitigating impact to all of that.

She also explained why the benefit arrives more slowly than investors would have liked.

The business hedges twelve to eighteen months ahead, so spot rate moves do not flow through immediately.

For investors, that means most of the currency benefit from this year’s move is still ahead of Wesfarmers.

ResMed: The other side of the trade

ResMed Inc (ASX: RMD) shows the opposite.

The business itself is performing well.

FY26 revenue rose 10% to US$5.65 billion, with non-GAAP earnings per share up 17% to US$11.17.

The problem for Australian holders is translation.

ResMed lists here through CDIs and declares its dividend in United States dollars, converted at the record date.

The most recent quarterly payment of US$0.66 per underlying share converted to just 9.28 Australian cents per CDI at an exchange rate of 0.7112.

The same American dividend buys fewer Australian cents when the currency is high.

The same arithmetic applies to the share price itself.

Despite this, chief executive Mick Farrell was upbeat about the underlying business.

We closed fiscal year 2026 with strong fourth quarter results, reflecting continued momentum of our global business, sustained demand for our market-leading products, and disciplined execution of our strategy.

Foolish takeaway

Currency may be a tailwind or a headwind.

However, I would not buy Wesfarmers purely because the Aussie dollar is high.

The shares sit on a price-to-earnings ratio above 30, and most brokers are cool on them.

Nor would I sell ResMed over an exchange rate, since its weakness this year owes more to a product safety action than to the currency.

What the strong dollar does is change the order in which good businesses compound.

The post Which ASX shares win when the Aussie dollar is strong? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed and Wesfarmers. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Santos Ltd (ASX: STO) shares could be one to watch on Tuesday after the company dropped a new update after yesterday’s market close.

The Santos share price finished the session at $8.35, up 1.7%, and has now climbed around 35% since the start of 2026.

With the stock already trading close to its 52-week high, investors will be watching closely to see how the market reacts to the company’s latest move in Papua New Guinea.

Here’s what we know.

Santos is increasing its exposure

Santos has agreed to spend around US$189 million, or roughly $262 million, to buy another 3.3% of the Papua LNG project from TotalEnergies.

Once the Papua New Guinea Government’s planned back-in is taken into account, Santos expects its stake to increase from 17.7% to 21%.

The deal is still subject to regulatory approvals and the project reaching a final investment decision, which is currently targeted for the fourth quarter of 2026.

If everything goes ahead, Santos expects its share of LNG production from Papua LNG to rise by around 19% to about 1.2 million tonnes a year.

There’s also a change at the top of the project, with ExxonMobil set to take over as operator from TotalEnergies and increase its own interest to 34.1%.

Santos believes having ExxonMobil operate both Papua LNG and the existing PNG LNG project could improve efficiency and help with execution.

CEO Kevin Gallagher said the deal gives Santos a larger position in a project the company sees as part of its next stage of growth, alongside Barossa and Pikka.

Gas policy is back in focus

The Papua LNG deal is not the only thing Santos investors have to watch this week.

The Australian reported today that Australia Pacific LNG wants exporters blocked from buying domestic gas to meet export commitments under the Federal Government’s proposed reservation scheme.

APLNG chief executive Dan Clark also warned that the proposed 20% reservation target could discourage investment in new supply.

Santos has raised similar concerns, arguing that pushing too much gas into the domestic market could lower prices in the short term but make future projects less attractive.

But the debate could get more attention tomorrow, when Santos CEO Kevin Gallagher speaks at the National Press Club.

Is there much upside left?

After a 35% rise this year, Santos shares are already trading close to their 52-week high.

TipRanks shows an average 12-month price target of $8.44, only slightly above Monday’s close. Six of the eight analysts shown still rate the stock as a buy, with the other two on hold.

That still leaves brokers broadly positive on Santos, although the average target is only a touch above the current share price.

The post Santos shares on watch after major Papua LNG deal appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If I were a retiree, there would be only a few ASX shares I’d be willing to rely heavily on for returns, including dividends. One of the top stocks I’d consider for the long-term is L1 Long Short Fund Ltd (ASX: LSF).

This business is one of the larger listed investment companies (LICs) available to Australians. The job of a LIC is to invest in shares and other assets on behalf of shareholders. It’s operated by the fund managers and analysts at L1 Group Ltd (ASX: L1G).

When I think about what retirees may be searching for, or may benefit from, I think the ASX share can tick all of the boxes.

Compelling passive dividend income

The feature retirees may be after most is passive income. Dividends from ASX shares are a great option, in my view.

For me, it’s not just a question of how large the dividend yield is. I’d also want to see dividend reliability and payout growth as well.

L1 Long Short Fund has certainly ticked the box for income. It has increased its annual dividend per share every year since 2021, when it first started paying a dividend. The LIC changed to quarterly dividends in 2025, and it has grown its quarterly dividend every quarter since then.

The business has a stated goal of increasing its dividend for shareholders, which it’s clearly doing.

If the business continues to increase its dividend payout each quarter over the next 12 months, it would have a FY27 grossed-up dividend yield of 4.7%, including franking credits, at the time of writing. I think that would be a great starting dividend yield for retiree investors.

Pleasing diversification

Another aspect that retiree investors may really benefit from is the diversification that the LIC can provide.

It invests in both ASX shares and international shares, using long-term investing and short-selling strategies. Short selling is when you can generate profit if a share price goes down, so it’s a good way to protect against falling markets.

Given its investments across Australia, New Zealand, North America, Europe and Asia, it can provide diversification for retiree portfolios that may be too focused on Australian assets (including property).

The LIC also tends to avoid investing in the tech sector or ASX bank shares, so it can generate returns in ways that differ from those of typical exchange-traded funds (ETFs) that focus on US or ASX shares. Its three most fruitful sector hunting grounds have been materials, industrials and communication services.

Strong portfolio returns is delivering capital growth

The portfolio strategy has been very effective, generating strong net returns. In the past five years, the LIC’s net return has been an average of 16.1% per year. Only some of this was used to pay dividends, with the rest of the investment returns retained within the business.

The increasing portfolio value has driven a rise in the share price. Over the past five years, the L1 Long Short Fund share price has risen 78% (at the time of writing).

Of course, past performance is not a guarantee of future returns, but I’m optimistic it can continue to deliver pleasing long-term returns.

The post Why this top ASX share is a retiree’s dream for FY27 appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in L1 Group and L1 Long Short Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.