Declining Dollar Helps North American Corporates: Kyriba
Posted by Colin Lambert. Last updated: November 22, 2023
The latest Currency Impact Report (CIR) from Kyriba, indicates that while they still face headwinds, US corporates were less impacted in Q2 2024 thanks to a drift lower in the dollar.
The report studies the quarterly impacts of FX exposures among 1,700 multinational companies based in North America and Europe with at least 15% of overseas revenue. The combined pool of corporations reported $20.15 billion in FX-related headwinds and $8.99 billion in tailwinds in the second quarter of 2023, with North American companies reporting $14.43 billion in headwinds, and European companies reported $5.72 billion in headwinds.
In Q1, North American corporates experienced the lion’s share of $22.5 billion headwinds, the latest report shows a 32% decline in the impact, during Q2, the Dollar Index declined some 3% from Q1. For the first quarter in some time North American corporates actually benefits from tailwinds, of $7.52 billion. This translates into a $0.05 impact on earnings per share, down $0.01 from Q1.
North American companies indicated the Canadian dollar as the most impactful currency, with 44.4% of companies referencing it as impacting revenues; the euro was second at 22.2%, and the Chinese yuan was third with 16.7% identifying it as impactful. In Europe, the euro was cited as the most impactful in earnings calls, Kyriba adds.
“Currency impacts are a global phenomenon and no geographic region is immune, demonstrated by the massive increase in European headwinds from last quarter,” says Melissa Di Donato, chair and CEO at Kyriba. “This data is a clear signal to global organisations with significant overseas exposure that currency volatility continues to erode value. Quantifying the impacts of FX on their businesses is critical for CEOs and CFOs to execute data-driven risk management programmes.
“CFOs have a long way to go to cost effectively manage FX risk to protect balance sheets, earnings and cash flow from currency swings,” she continues. “Staying vigilant for the remainder of the year and into next year should be a top priority to mitigate the currency effects from geo-political events, economic volatility and financial market concerns.”