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9 Jan 2015
A strong USD dollar impact - BBH
FXStreet (Barcelona) - Analysts at Brown Brothers Harriman noted the US earnings seasons kicks-off and how many investors are concerned that the rise in the dollar will hurt US corporate earnings.
Key Quotes:
"The dollar's rise did not happen out of the clear blue.
"It was not a surprise".
"Corporate treasurers were well aware the Fed was tapering and that the ECB and BOJ were engaged in further easing. Most foreign exchange specialists had forecast a stronger dollar".
"A stronger US dollar environment often has weighed heavily on emerging markets. This is not a surprise".
"Moreover, corporate treasurers have numerous financial tools, and the ability to construct natural hedges, to manager their currency risks. On top of that, they get favorable accounting treatment for properly hedging their currency risks".
"That said, expectation for Q4 earnings have been continuous revised lower since September, when the consensus called for a 9.6% increase. The most recent surveys suggest earnings growth of around 1.2%. Macro-economics considerations, like weak demand in Europe and Japan, are indeed a headwind to the US corporate earnings".
"It is interesting to note how two companies in the same industry with roughly the percentage of international sales can report two markedly different currency impacts. Journalists and equity analysts would do everyone a service by pushing back against assertions about the dollar-impact and question the corporate hedging strategies".
Key Quotes:
"The dollar's rise did not happen out of the clear blue.
"It was not a surprise".
"Corporate treasurers were well aware the Fed was tapering and that the ECB and BOJ were engaged in further easing. Most foreign exchange specialists had forecast a stronger dollar".
"A stronger US dollar environment often has weighed heavily on emerging markets. This is not a surprise".
"Moreover, corporate treasurers have numerous financial tools, and the ability to construct natural hedges, to manager their currency risks. On top of that, they get favorable accounting treatment for properly hedging their currency risks".
"That said, expectation for Q4 earnings have been continuous revised lower since September, when the consensus called for a 9.6% increase. The most recent surveys suggest earnings growth of around 1.2%. Macro-economics considerations, like weak demand in Europe and Japan, are indeed a headwind to the US corporate earnings".
"It is interesting to note how two companies in the same industry with roughly the percentage of international sales can report two markedly different currency impacts. Journalists and equity analysts would do everyone a service by pushing back against assertions about the dollar-impact and question the corporate hedging strategies".