Q1 has lowest currency losses since 2014

Currency volatility caused a US$6.7bn loss to North American and European corporations in 2017’s first quarter, research from FiREapps found, a foreign exchange exposure management software firm.

This was the smallest loss since 2014, said the firm in a report titled: “FiREapps Q1 2017 Currency Impact Report: A Survey of North American & European Corporate Earnings”.

The last five quarters have all seen higher volatility than in 2013 and 2014 – a period of low volatility which was followed by a $14.66bn increase in negative currency impacts between Q3 2014 and Q4 2014.

“Looking to previous quarters, there is a pattern of low volatility followed by a steep increase in volatility and negative currency impact,” said FiREapps.

For the quarter, negative currency impacts were reported by 228 companies, with 213 of these in North America and 15 in Europe.

Of these companies, North American firms sustained $6.47bn in negative impacts and European corporations sustained $227.77m.

In the first quarter of 2016, 400 companies reported negative currency impacts.

“The decrease in the number of companies reporting shows that many multinationals are still not aware of what their risks are and have been lucky to sustain only minor impacts during the last few low volatility quarters,” the report argues.

The total quantified the negative impact in 2017’s first quarter was 67% smaller than the prior-year quarter, totalling US$6.7bn, with US$6.47bn coming from North American corporates alone.

The euro was the currency that had the most impact on North American corporates for the first time since the Brexit referendum vote, the report found.

The pound had the most impact on European companies for the fourth quarter in a row.

In Europe, this quarter was the seventh in a row that the pound sterling made an appearance on the top five list after debuting on the European list in 2015’s third quarter.

Interestingly, the number of corporates reporting a currency impact who fielded questions from analysts on the topic during their earnings calls was surprisingly low in both Europe (14%) and North America (16%).

 

Source: FiREapps, Q1 2017

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