Currency Headwinds Ease in Q4 2023: Kyriba

The slowdown in FX volatility towards the end of 2023 led to the negative impacts on earnings for North American and European corporates more than halving, according to the latest Currency Impact Report from Kyriba.

The report analyses the earnings calls of 1,700 publicly traded North American and European companies as part of a continued effort to provide insight into how foreign exchange impacts the revenue, earnings, and cash flow of global organisations. It finds the currency impact on earnings reported by multinational companies totalled $14.67 billion in Q4 2023 ($6.8 billion in headwinds and $7.87 billion in tailwinds). The total annual currency impact for 2023 reached $95 billion compared to 2022, which totalled $169 billion in a year which saw a record rise in interest rates.

Publicly traded North American companies recorded a 62.7% decrease in headwinds to $2.63 billion and tailwinds of $9.63 billion, down 52.1% from Q3 2023. In North American earnings calls, the euro was the most mentioned currency, the Chinese renminbi the second-most mentioned, followed by Sterling, the Canadian dollar, and the Mexican peso. The latter was the most volatile currency.

European companies reported $4.17 billion in FX-related losses, about 53.5% less than the previous quarter. Of the 850 Europe-based multinationals analysed, 12.4% reported headwinds in Q4 2023. Of those, 25.7% quantified their negative impacts. The euro was also the most mentioned currency in earnings calls for Europe, followed by the dollar and the Swedish krona. The euro and the pound are the most volatile.

“Global organisations are sensing some relief and optimism. Following two consecutive quarterly rises in negative currency impacts to North American and European companies, we saw currency impact begin a downward trajectory to close out 2023,” says Melissa Di Donato, chair and CEO at Kyriba. “This is an opportune time for CFOs to break out of liquidity gridlock. Furthermore, given what we are seeing with the currency markets in 2024, businesses need to heighten their vigilance when managing and monitoring their currency risk.”

Andy Gage, senior vice president of FX solutions and advisory services at Kyriba, adds, “What we saw in Q4 was a by-product of relative weakening of the US dollar, which is why we saw a significant decrease in headwinds and increase in tailwinds, both in line with the expectation. If we contrast that to what we are seeing in the first half of 2024, which is showing surprising US dollar strength, we expect more headwinds to be reported for US corporations in particular in 2024.”