Strong Dollar Drives FX Headwinds

North American multinationals lost $34.25 billion in the third quarter due to currency volatility while their European counterparts reported $3.02 billion in FX-related losses.

The Quarterly Currency Impact Report, released by cloud treasury and financial-management platform provider Kyriba, reveals record foreign exchange (FX) exposures—$49 billion—up 104% in the latest quarter and 337% in the previous six months.

Based on an analysis of earnings calls of 1,200 publicly traded North American and European multinationals that do business in multiple currencies and have at least 15% of their revenue coming from overseas, the report reveals the impact of a strong dollar and global volatility on bottom lines.

North American multinationals lost $34.25 billion in the third quarter due to currency volatility, a 134% increase from the previous quarter. By comparison, European corporations reported $3.02 billion in FX-related losses, a 68% increase in negative currency impacts.

North American companies saw the Russian ruble, Canadian dollar and the euro as the most impactful currencies. In contrast, European companies mentioned the euro, followed by the dollar and ruble.

Looking at the euro versus the dollar, Edi Poloniato, co-head of Banking Solutions at Kyriba, says the euro was $1.20 against the dollar just a year ago; now it’s 98 cents. “If you’re a euro- or pound-based company and have activities in dollars, then you have a big issue because of the forex volatility today.”

It isn’t just multinationals suffering from FX exposure; it’s also adversely affecting mid-market companies, according to Poloniato. While Fortune 500 companies are most likely to plug straight into bank-agnostic treasury management systems to help them mitigate FX exposures, smaller companies are more likely to turn to banks, which are increasingly looking to white-label the same systems.

“Technology is probably the most powerful tool to enable companies to manage and optimize their liquidity,” he adds. “If they need to buy, do a forward, or hedge a dollar position from their euro account, they can immediately access the bank’s online portal to do the transaction on our platform without leaving.”