Stronger Dollar Will Take Bite Out of Overseas Earnings for Us-Based Multinationals
Global Finance › Vol. 22 Nbr. 9, October 2008
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Summary
Get ready for some unpleasant surprises on the earnings front as a result of the dollar's sudden recovery from a record low of $1.60 against the Euro in mid-July. By early last month the Euro was trading at an 11-month low of $1.42. The unusually sharp dollar advance against the Euro and other major currencies means that many corporations will likely experience dramatic negative impacts to profitability due to foreign-exchange-related losses, which will be reported in the current earnings season beginning at the middle of October. Not only will the rising dollar have significant effects on revenues and commitments of companies with overseas operations, but it also will affect procurement trends. With volatility increasing in the foreign exchange market, companies will have less confidence in providing guidance on earnings. CEOs, CFOs and treasurers are accountable for these currency-related losses, and they will be facing some tough questioning from board members.
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Stronger Dollar Will Take Bite Out of Overseas Earnings for Us-Based Multinationals
Get ready for some unpleasant surprises on the earnings front as a result of the dollars sudden recovery from a record low of $1.60 against the euro in mid-July. By early last month the euro was trading at an 11-month low of $1.42.
The unusually sharp dollar advance against the euro and other major currencies means that many corporations will likely experience dramatic negative impacts to profitability due to foreign-exchange-related losses, which will be reported in the current earnings season beginning at the middle of October, says Wolfgang Koester, chief executive of Scottsdale, Arizona-based Fireapps, which provides software to measure and manage foreign currency exposure."Even though there are proven methods to ...See the full content of this document
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