COMMENTS from Reserve Bank of Australia Governor Glen Stevens last week would seem to indicate another interest rate cut in the short term is unlikely.
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Rates are probably on hold for a while.
One stand-out feature resulting from this comment has been the rally in the Australian dollar, which I think is broadly indicative of the spate of more positive Australian economic data.
The dollar has defied all predictions, including my own, that it would retreat below US85 cents.
In the short term I think the more positive economic commentary has created a raft of short covering purchases from those institutions which had already placed bearish bets on the currency.
In the longer term, I would suggest lower commodity prices and a stronger US economy will weaken our dollar.
From an Australian investors' perspective this is probably a good time to use this currency strength to either gain direct exposure to international markets or buy stocks that are leveraged to international earnings.
One such company is Resmed (RMD), the global business involved in the development and sale of medical products for the treatment of disorders such as sleep apnoea.
The company recently reported US sales had declined (the first time in history sales have declined).
Competitive bidding has continued to impact on growth with RMD being very coy about releasing details on price and volume, except to say US prices of its products will reduce in future, but remain at a premium to peers.
The good news is RMD is growing strongly in other international regions (up eight per cent) and Australian investors are getting the translation benefits of a falling currency.
From a structural perspective the cost of goods sold is falling as the relocation of production to Singapore continues, with large increases in gross margins providing a buffer to the disappointing US result.
I think Resmed is in a transitional period.
The price declines will hurt this year's results but next year pricing will be stable and the strong positive underlying demographic trends will re-emerge as the dominant driver of earnings.
From a valuation point of view, at a forward price/earnings of of 16 times with 9pc constant currency earnings per share (EPS) growth, RMD is screening attractively, with structural tailwinds.
Catalysts we look forward to seeing are the market reaction to new product launches (masks and respirator), continual lowering of the cost base and the ramp up of the on market share buyback (driven by RMD's net cash balance sheet of about $US550 million).
Christopher Hindmarsh is executive director at JBWere Private Wealth, email:
Christopher.Hindmarsh@jbwere. com or telephone, (02) 9325 2639.
This article contains general advice only. In preparing it JBWere didn't take into account the investment objectives, financial situation and needs of any particular person. Readers should assess if the information is appropriate for their circumstances, or contact a licensed financial adviser. JBWere is 80.1pc owned by National Australia Bank and 19.9pc by Goldman Sachs.
