Currency Impact on N.American Q4 Earnings Falls

The effect of currency market fluctuations on U.S. corporate results in the fourth quarter of 2016 was down sharply from a year earlier, a report from currency risk consulting firm FiREapps showed on Tuesday.

For the fourth quarter of last year, the negative impact of currency fluctuations on North American companies – including the United States, Canada and Mexico – that quantified an exchange-rate effect was $7.94 billion, up from the third quarter’s negative $6.81 billion, but sharply lower than the negative $33.94 billion in the last quarter of 2015, according to FiREapps.

The data also showed fewer companies overall reporting the currency impact in the fourth quarter of 2016 compared with the last quarter of 2015.

But elections in Europe will likely cause volatility to increase in the coming quarters, said FiREapps CEO Wolfgang Koester.

“You’re going to have this testing of protectionism, testing of the euro, testing of the euro zone continue certainly through the end of September … So we expect increased volatility versus the last couple of months, and that’s going to (create) surprises for companies,” he said.

The euro surged against the U.S. dollar and the yen sank on Monday on relief over Emmanuel Macron’s victory against anti-euro nationalist Marine Le Pen in the first round of France’s presidential elections.

The foreign currency earnings of U.S. multinational companies are worth less in dollars when the dollar is stronger. Conversely, the robust U.S. currency also makes American-made goods and services more expensive overseas.

Reuters

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