THE strength in the dollar is a pain for the resources industry. But thanks to commodity price increases largely outpacing the revenue-sapping effects of the higher exchange rate, it is not as big a pain as it could have been. Copper is a prime example. The key industrial metal has risen 27 per cent in the past year to $US4.10 a pound. The near-12 per cent surge in the US exchange rate in the same period has lessened some of the gain, reducing the price increase in Australian-dollar terms to a 14 per cent improvement. But at least it ends up being a net gain. Advertisement: Story continues below That impact is repeated for all the mineral commodities, priced as they are in US dollars. If the dollar's strength hit hard anywhere in particular, it was for zinc exporters, because zinc was the only metal to go backwards during the year in US-dollar terms (down 11 per cent from $US1.15 a pound to $US1.02 a pound) - a fall amplified to a 21 per cent crunch in Australian dollars. Movements in the dollar can be the most important external influence on mining company earnings. Industry leader BHP Billiton is a case in point. In the 2010 June year, the dollar averaged US88¢, up from US75¢ in 2009. The rise wiped $US1.7 billion from BHP's Australian earnings - more than offsetting commodity gains for the period. For the 2011 June year, BHP has forecast that each US1¢ movement in the exchange rate from the 2010 average would swing its after-tax profit by $US95 million. So there would be some real revenue pain at the dollar's present level. But that impact is more than being offset by strong iron ore prices, higher oil prices and stronger coking and steaming coal prices.

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