The US dollar is soaring – So which ASX stocks stand to benefit?

The US Dollar is in a formidable bull market after Donald Trump's presidential victory, and amid ongoing tariff threats and a robust economic outlook for the United States.

The US Dollar Index has surged 6.3% since late September, completing an impressive eight-week rally – the longest since September 2023. Over the same time period, the Australian Dollar has dipped by a similar magnitude and is hovering near a seven-month low.

US Dollar Index (Source: TradingView)

Bloomberg reports that speculative traders have ramped up their dollar-positive bets to the most bullish level since late June, signalling confidence in further gains.

Source: Bloomberg

As the US Dollar continues to trend higher, you might start to think – Which ASX-listed companies stand to benefit?

Sector Winners and Losers

Last year, Citi analysed the sectors with the highest/lowest betas and T-stat measures against a rising Australian dollar (the opposite is happening now).

• Beta: Measure of a stock's volatility relative to the market (or, in this case, relative to the Australian dollar). A beta of one or more suggests the stock is aggressive and its price movements are more volatile than the Aussie.

• T-Stat: A high T-stat suggests that the movements between the Aussie and cyclical sectors are unlikely to be due to chance. A low T-Stat suggests that the difference could be attributed to random variations or other factors.

Source: Citi Research December 2023

The analysts also examined which stocks tend to benefit from a higher/lower Australian dollar based on a ten-year monthly backtest.

The data shows that cyclical sectors have historically outperformed in a falling US dollar environment.

Source: Citi Research December 2023

While defensive sectors and those with hefty US-dollar-denominated earnings tend to outperform in a rising US dollar environment. "This is because both defensive outperformance and a falling Australian dollar typically coincide with economic uncertainty," the analysts said in the note.

Source: Citi Research December 2023

Stocks by US Dollar Exposure

Morgan Stanley and Macquarie analysts conducted a separate analysis focusing on stocks with significant foreign revenue exposure, offering an additional perspective on potential earnings tailwinds.

For instance, Aristocrat Leisure says a single US cent change in the AUD/USD exchange rate could translate to an estimated $24 million impact on the Group's net profit after tax for the year ending 30 September 2024.

Source: Morgan Stanley 2024

Source: Macquarie Research November 2024