FX Increasingly a Treasury Priority, says FiREapps

Corporate treasurers are increasingly seeing foreign exchange as a priority, against the backdrop of the highest currency volatility in 20 years, reports FiREapps.

North American corporates reported US$18.66bn in negative currency impacts in the fourth quarter of 2014, with the surging US dollar (USD) hitting business abroad reports the group, a specialist in FX exposure management solutions. For 2014 as a whole, North American companies reported US$27.13bn in negative currency impact, a 53% increase on the 2013 total of US$17.78bn.

FiREapps reports that the figure is the highest since the depths of the euro crisis, and is likely to worsen in the first quarter of 2015. “In Q4 of 2014, the USD rose 4% relative to the euro,” the firm adds. “Set against the fact that the dollar has risen 8% against the euro in the first two months of 2015 alone, it appears that worse impacts may be yet to come.”

This rise has been accompanied by the USD’s appreciation against most other major world currencies in the last two quarters of 2014; a rise that has accelerated since the beginning of this year.

FiREapps notes that last December, the consensus forecast was for the euro to fall to 1.19 against the USD by the end of 2015. That mark was crossed in early January however. The euro ended February at 1.12 and consensus now has it falling to 1.05 by the year-end.

“As a result, companies must either reset their budget rates or revise their guidance,” the firm comments. “Those revisions have not been small, and they’re not without pain.

“And if the euro moves again – which it likely will, up or down – rates will have to be reset yet again.”

Critical Analysts


The report finds that in Q414, the highest percentage of companies ever reported fielding questions about currency impact from analysts. It cites the example of Hewlett Packard’s chief executive (CEO), Meg Whitman, who admitted that “currency surprises” were behind the group’s US$0.30 negative earnings per share (EPS) guidance adjustment for the full-year 2015. Analysts on broadcaster CNBC responded by suggesting that the company’s risk management team “should all be fired”.

The FiREapps report also quotes NeuGroup’s founder and chief executive (CEO), Joseph Neu, who comments: “The focus on FX stands to reason, given the growing consensus that we are in the midst of another 6+year, strong-dollar cycle, representing a substantial headwind for US multinationals (and a tailwind for their non-US competitors).

“Accordingly, treasurers are wise to review FX management programmes to ensure they allow the flexibility to manage through long-term dollar strength as well as dollar weakness, which they had perhaps grown too used to.”

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