High dollar hurts profits

The continued rise of the Australian dollar, which hit a 24-year high of US94 cents yesterday, is eating into company profits. Macquarie Research has estimated that the effect of the strong currency could see 5 per cent deducted from corporate profits if the dollar pushed above US95 cents and stays there for the rest of this year. If, as expected by some analysts, the Australian dollar reaches parity with the US currency, 2008 profits could lose 8 per cent. Companies are already suffering with Aristocrat saying that the currency had reduced its net profit for the year to December by $18 million while Fosters says that it cost the group $36 million in its first-half profit.

Source: The Australian Financial Review