The rise of the Australian dollar is presenting challenges for major Australian companies, particularly Macquarie Group. Macquarie is a diversified financial group providing asset management and finance, banking, advisory and risk and capital solutions across debt, equity and commodities. It also provides broking and trading services.
According to Bloomberg Intelligence analyst Matt Ingram, Macquarie’s assets could decline by more than $1 billion if the Australian dollar remains at its current levels. Ingram forecasts a $1.4 billion balance sheet hit for every 10 per cent appreciation in the local currency. As of Wednesday, the Australian dollar briefly exceeded US70¢ for the first time in three years.
Hugh Dive, chief investment officer at Atlas Funds Management, noted the strong Australian dollar would create a “headwind for reported earnings”. Ingram also stated that a higher Australian dollar against the euro and British pound would negatively impact Macquarie’s balance sheet, reducing equity by about $247 million and $152 million, respectively. Macquarie’s geographically diverse operations make it particularly sensitive to foreign exchange movements, with approximately 64 per cent of its income coming from the Americas, Asia, Europe, and the Middle East.
Despite these concerns, Dive remains unconcerned about the impact on Macquarie’s full-year results, citing currency volatility. MST Financial analyst Brian Johnson added that falling bond yields could partially counterbalance the currency effects. On Wednesday, Macquarie shares fell $3.02, or 1.4 per cent, to trade at $212.17.
