US Corporates Facing Increasing FX Headwinds: Kyriba
Posted by Colin Lambert. Last updated: July 24, 2024
The latest quarterly Currency Impact Report from Kyriba reveals a sharp increase in currency headwinds for US corporations, with their collective FX impact rising 219% in the first quarter of 2024, compared to the last quarter of 2023.
The report analyses the effects of FX rates on international corporate earnings via a study of earnings calls, and finds that negative impacts rose by 44.6% in the quarter, totalling just under $10 billion amongst North American and European corporates. Conversely, other companies reported currency tailwinds, although they only totalled $2.7 billion.
European companies have also felt the sting of currency fluctuations, Kyriba observes, albeit in a contrasting trend to their North American counterparts, as they reported $2.72 billion in FX-related losses during Q1 2024, a 65.2% decrease from the previous quarter.
In what may be a surprise given the dollar’s grind higher against the yen, the Japanese currency is not cited as an impactful currency by corporates. Instead, the Argentinian peso (along with the US dollar) are most frequently cited as impactful currencies by North American and European firms, respectively. The Turkish lira was noted for its high volatility during the quarter.
“Currency volatility continues to pose a substantial risk to multinational corporations, significantly impacting their bottom lines,” says Melissa Di Donato, chair and CEO at Kyriba. “Our latest report underscores the heightened challenges companies faced in the first quarter of 2024. More importantly, it reinforces the critical need for strategic currency risk management and the use of advanced predictive analytics to mitigate these risks and optimise liquidity performance.”
Andy Gage, SVP of FX solutions and advisory at Kyriba, adds, “The early 2024 trends are showing an unexpected strength in the US dollar, thus forecasting a rise in FX headwinds for US corporations for the second half of 2024. Inflation, coupled with this strong dollar, is putting additional pressure on global economic stability, making it imperative for companies to employ robust risk management strategies.”