Majority of exporters to increase hedging activity as businesses struggle with a high Australian dollar
EMBARGOED UNTIL 00.01 (AEST) 25 August 2011: Over half of small and medium-sized Australian exporters plan to increase their currency hedging activity in response to the high Australian dollar, according to the latest Commonwealth Bank Aussie Dollar Barometer.
In addition to the 53% of exporters planning to hedge their exposure, there were also over two-thirds (68%) of importers which said they plan to hedge their USD exposure over the next three months, a significant jump on the results one year ago.
The Barometer tracks small and medium-sized importers and exporters’ exposure to the Australian dollar, their expectations for trading levels and hedging plans for managing foreign exchange risk.
According to Joseph Capurso, Currency Strategist at the Commonwealth Bank, the tough conditions being felt by many exporters were now painfully clear, with exporters continuing to restructure their business operations and plan more proactively in order to stay competitive.
“The reality is that the pressure brought about by the high Australian dollar means that these firms are being required to make changes to their business to lift productivity. Based on exporters’ predictions for the dollar of US$1.17 by the end of 2011, they will continue to feel this impact for some time.”
The results of the latest report follow previous findings which identified that exporters also believed they were uncompetitive when the Australian dollar moved into a range of US$ 0.90-1.00 and as a result had planned on reducing selling prices.
The Barometer reveals medium-sized businesses are suffering the most, with a higher proportion of those with annual turnover of $150-500 million planning to cut jobs as a result of the high Australian dollar. In contrast, there were fewer businesses in the $5-25 million category looking to cut jobs.
Despite the bleak job outlook, the Barometer reveals that most small and medium sized businesses that export and/or import expect to increase their AUD/USD exposure in the next three months, a key indicator of future business expansion. While almost all importers (89%) expect to increase their exposure, less than one-third (30%) of exporters expect to increase their exposure.
“We’ve seen a continued shift towards hedging over the past year as businesses work to control costs and lift productivity” said Mr Capurso.
“There are of course two sides to the story. While exporters are continuing to struggle, importers are clearly benefiting from the ongoing strength in the dollar. In fact, 17% of importers are looking to increase their workforce and it is also this group that remain the most bullish on the dollar, expecting it to rise to US$ 1.23 by the end of 2011.”
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- About the Aussie Dollar Barometer
The Commonwealth Bank Aussie Dollar Barometer is prepared every three months based on a survey conducted by East & Partners. East & Partners is a market research and advisory firm. For the August 2011 edition of the Commonwealth Bank Aussie Dollar Barometer, East & Partners interviewed over 600 businesses turning over AUD 5–500 million per year. Businesses were asked a range of questions about their exposure to and views about AUD/USD. East & Partners surveyed businesses from 1 to 11 August 2011. The average value for AUD/USD during the survey period was 1.05 US dollars. By comparison, the AUD/USD averaged 1.08 US dollars in the April survey.