The rapid rise of the dollar since The beginning of the year has two faces for US multinationals, which seek to limit the consequences of the phenomenon.
For an import company, the rise of the greenback against the euro, the yen or the British pound is an opportunity because the products it buys are cheaper.
But for a US export firm, products delivered in dollars are more expensive, with the risk of losing customers. That’s not counting the loss in value of foreign-earned income when it’s converted into dollars.
Several companies have already revised their annual projections, following the example of the computer giant Microsoftwhich warned that its quarterly turnover was going to be lower by 460 million dollars and its net profit would suffer a decrease of 250 million due to the effect of the exchange rate.
Adobe, Salesforce, Biogen, Pfizer, all of these companies warned that the rapid rise in the dollar at the start of the year was going to have a bigger than expected impact on their balance sheets.
Results
Logically, the most exposed firms are those that receive most of their income outside the United States, starting with technology giants, medical equipment manufacturers and service companies, according to Kyriba, a liquidity management platform in companies. .
Currency effects could weigh on Wall Street’s S&P 500 companies by as much as $40 billion in the first half, Kyriba forecasts.
The strong rise in interest rates decided by the US central bank (Federal Reserve, Fed) to combat inflation, combined with the flow of investors to the United States in search of safe placements in uncertain times, ended up boosting the dollar.
The greenback has gained 13% against the euro in the last 12 months, thus approaching parity with the European currency, and against the yen the price of the dollar has gained 22%.
“In the short term, this is good news for the United States as this makes imports less expensive, and therefore can curb inflation,” said Desmond Lachman of the American Enterprise Institute think tank.
In the medium term, the effect on the US economy is more somber because if exports sink “this will increase the US trade deficit.”
But multinationals “don’t really have control” over these elements, the expert explained.
However, companies can mitigate the impact of foreign currency fluctuations on their prices and invoices by adopting hedging instruments.
Most multinationals adopt these mechanisms to try to predict the evolution of prices, explained Bob Stark of Kyriba.
Stark acknowledges that it is not an exact science, especially in a period of great uncertainty about inflation, interest rates or the possibility of a recession, among others.