This translation has been automatically generated and has not been verified for accuracy.Muted gyrations in foreign exchange markets has turned companies complacent about hedging currency risks, and as the third-quarter earnings season gets underway investors should brace for U.S. companies to report sizeable negative impacts due to the stronger U.S. dollar, analysts warned.
Earnings for S&P 500 companies are expected to have fallen 3.1 per cent in the third quarter from a year ago, according to IBES data from Refinitiv. At the end of the third quarter, the dollar was up more than 6 per cent against the euro compared to a year ago. However, the index has slipped since then and was at 6.8 on Friday, 2 points shy of its 5-year average.
“We’re definitely having more discussions with clients around the currency swings but so far they haven’t seen any noticeable uptick in hedging,” said Minh Trang, senior FX trader at Silicon Valley Bank.Story continues below advertisement Whether companies ramp up hedging activity depends on the fate of ongoing trade-related negotiations between the world’s largest economies, analysts said.