For import export businesses, the strong Aussie dollar provides significant bargaining power when buying from China. The US dollar is the preferred currency for manufacturers in China and you will notice Chinese online suppliers quote in US dollars. The very real risk right now is a sudden depreciation of the Australian dollar to the US dollar. If this occurs, or rather when, it will have dramatic impacts on Australian importers, including those importing goods from China. The long term trading range of the AUD is nearer to 70 US cents – so it has a long way to fall.
The issue most commonly faced by importers is when a purchase is made, the exchange rate drops from time of contract to time of payment – which can be three months or more. The result is the cost of goods can be significantly more than budgeted, potentially making an imported product unprofitable. There are a range of simple and more complicated alternatives ranging from basic currency hedging (stocking up on US dollars) to forward contracts and even more complicated hedging products.
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