US Companies’ Unhedged FX Exposures Cost $9.54 Billion: Report
Posted by Colin Lambert. Last updated: July 14, 2021
The latest quarterly report from Kyriba says that currency volatility in Q1 2021 negatively impacted North American and European companies to the tune of $9.54 billion, with the hit to North American companies increasing by 322% from the previous quarter to $5.87 billion.
“Despite warnings that currency volatility would be on the rise, many companies were unprepared to manage FX exposures, according to the data. As businesses experience a post-pandemic surge in activity, CFOs were unable to keep up with currency movements, unnecessarily risking corporate liquidity,” says Wolfgang Koester, who has the title of “chief evangelist” for Kyriba. “With nearly $10 billion in preventable losses, CEOs need their finance chiefs to understand the currency exposures within their balance sheet and take action to retain profits and maximise liquidity to sustain growth.”
The Chinese renminbi was cited as the most impactful currency by North American companies, previously it was the euro. USD/CNY dropped just under 1% ahead of the broader market opening for the year on January 4, 2021, at 6.47, and then steadily climbed, to hit a peak above 6.57 in the days ahead of March 31 – it exited the quarter at 6.55.
Unsurprisingly, the dollar remained the currency most mentioned as impactful by European companies, followed by the dollar and the Renminbi.