The Aussie dollar hit a new 8-week high overnight against the United States dollar, climbing as high as 66.75 US cents. The last time the Australian currency traded at these levels was back in early March.

It follows the massive dollar sell-off in late March when the ‘flight to safety’ amid the stock market crash pushed our dollar under 57 US cents – a multi-decade low. The Aussie is seen as a ‘risky’ currency partly due to our economic ties to China and, hence, is often sold-off with ructions in the global economy. Thus, the recent rise reflects a growing appetite for risk against safety in global markets.

So, apart from restoring some national pride, what does this move mean for ASX shares?

What a high Aussie dollar means for ASX shares

A higher exchange rate typically means imports become cheaper while exports become more expensive. That’s because it takes less Aussie dollars to buy a good or service denominated in foreign currencies with a higher exchange rate. Vice-versa for selling goods or services.

Therefore, a higher currency benefits companies importing products into Australia to sell, disadvantaging companies selling goods or services beyond our shores.

Thus, I’m looking at retailers as the biggest beneficiaries of a higher Aussie dollar. Not so much companies like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL), which sell mostly Australian products as their benefit is far more muted.

No, it’s companies like JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) who stand to benefit the most, in my view. These companies sell electronics, TVs, white goods and computers, most coming from markets like the US, Japan, and China. For JB and Harvey Norman, importing these goods will now be cheaper. This price saving could then be banked for extra profits or passed onto consumers at no cost to the company. Cheap TVs all round!

Conversely, the biggest losers from a higher Aussie dollar are exporters like mining companies. Most commodities (like iron ore or gold) are priced in US dollars, so miners like BHP Group Ltd (ASX: BHP) or Newcrest Mining Limited (ASX: NCM) receive US dollars. These are then domiciled back into Aussie dollars and with a higher exchange rate, they’ll get less Aussie dollars back for each US dollar received.

Foolish takeaway

Currencies change all the time and have cycles of their own. Therefore, the Aussie dollar isn’t something you should lose too much sleep over, in my view. Nonetheless, its always good to know exactly what’s happening in the economy and your ASX share portfolio, of which exchange rates play a meaningful part.

More reading

• Why Afterpay, CSL, Fortescue, & Newcrest shares are dropping lower
• 3 easy rules for building a massive ASX share portfolio
• Where to invest $5,000 in ASX 200 shares today
• Where will the Coles share price be in 1 year?
• 3 exciting ASX growth shares to buy in June

Motley Fool contributor Sebastian Bowen owns shares of Newcrest Mining Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The Aussie dollar just hit an 8-week high. Here’s how it affects your ASX shares appeared first on Motley Fool Australia.

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these shares are in the buy zone:

City Chic Collective Ltd (ASX: CCX)

According to a note out of Goldman Sachs, its analysts have retained the buy rating and $3.25 price target on this fashion clothing retailer’s shares. The broker has lifted its forecasts for City Chic in response to the earlier than anticipated reopening of its retail stores. The broker believes the company will keep its dividend suspended until FY 2022 and focus on reinvesting in medium-term growth options both at home at overseas. It expects this to lead to a 20.1% compound annual growth rate for earnings per share between FY 2019 and FY 2022. While not my favourite option in the retail sector, I think it could be worth a closer look.

Metcash Limited (ASX: MTS)

Analysts at UBS have upgraded this wholesale distributor’s shares to a buy rating with a $2.85 price target. According to the note, the broker believes the underperformance of its share price since its capital raising has created a buying opportunity. UBS likes Metcash due to the strength of its grocery business and the improving outlook for its hardware business. I think UBS makes some good points and Metcash could be a decent option for investors.

Telstra Corporation Ltd (ASX: TLS)

A note out of Credit Suisse reveals that its analysts have retained their outperform rating but trimmed the price target on this telco giant’s shares slightly to $4.10. Although it suspects the company’s earnings will take a bit of a hit from lower roaming and enterprise revenues, it believes the market is being too harsh. As a result, it sees Telstra’s share price weakness as a buying opportunity for investors. I agree with this view and would be a buyer of Telstra’s shares today.

More reading

• Why ALS, Metcash, NAB, & Pointsbet shares are racing higher
• 3 easy rules for building a massive ASX share portfolio
• Tax planning for ASX 200 investors
• Latest spending data could drive the ASX retail sector higher
• 3 quality ASX 200 blue chip shares to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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