Exporters worried as dollar hits 13-month high

As the dollar reached another 13-month high yesterday, exporters were feeling the pinch with an industry expert saying the volatility of world currencies is hurting their market.

The dollar gained some ground to US89c yesterday, two months after it reached a 10-month high of US85c, with speculation it could reach above US90c within days.

The rally contradicts comments from Westpac senior economist Matthew Hassen, who said in August the current rally would not be able to sustain itself.

“We don’t expect the current rally to continue. At the moment the rally is tied in with the improving sentiment around the world that has seen investors increase their exposure to high risk assets, which has increased commodity prices. Whether you see that as self-reinforced, it’s hard to tell right now. But we don’t expect it to continue.”

But Peter Mace, general manager of the Australian Institute of Export, says exporters are praying for an end as the currency’s fast movement makes it difficult for companies to lock down beneficial long-term prices.

“The volatility is hard. People go overseas, negotiate a price for their product and get it started out, and then the currency starts messing about and they miss out on some gains.”

“Some companies have the ability to re-price, but others are fixed in. If they haven’t hedged properly they will be feeling the pressure. But interestingly new exporters are doing better than existing companies, because they’ve entered the market in a volatile time and have to really think about what they’re doing. So that’s the answer, just plan ahead and think about your strategy.”

Mace says exporters need to think ahead when it comes to dealing with volatile currencies. “It is necessary for people to think about how they are going to manage their exposure… they need to hedge their investments, and so on.”

Austrade chief economist Tim Harcourt says while many exporters are hurting due to the higher dollar, they have an opportunity to help themselves by shifting their business focus.

“You need to remember that a large percentage of exporters also import goods as well. And so if they start to import goods and equipment that they need now, they’re getting more bang for their buck. The same goes for investors, who will get a lot more right now. They should look at this time as an opportunity.”