Analysis-Dollar’s stubborn strength dents US companies’ earnings cheer

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What's different a year after the wildfires? | SaltWire #novascotia #firefighting #wildfires #newsNEW YORK - A host of U.S. companies are faced with a problem they had not expected to confront this year: a rising dollar.

The dollar's strength in the latest quarter comes during a period of robust corporate profits. With well over 80% of the S&P 500 having reported first quarter results, companies are on track to have increased earnings by 7.8%, up from an expectation of 5.1% growth in April, according to LSEG IBES. Nonetheless, companies from Apple Inc and IBM to Procter & Gamble have mentioned foreign exchange as a headwind.

Yields in the U.S. stand above those in many other economies as a result, bolstering the dollar's appeal over other currencies. Some firms that advise companies on managing FX risk noted a rise in hedging activity in recent weeks, though quieter currency markets have made hedging a less urgent issue for some companies even as the dollar has risen. In March, Deutsche Bank’s index of currency volatility fell to its lowest level since September 2021.

 

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