The dollar is on a tear, and that is shaping corporate strategy on both sides of the Atlantic.
U.S. exporters are bracing for tough times. Their goods overseas are suddenly more expensive in many places, and foreign earnings are worth less when translated back into dollars.
For European exporters, by contrast, the dollar’s strength has created opportunity. The U.S. currency has strengthened 4.3% since the Nov. 8 U.S. presidential election, recently approaching a 14-year high, giving the companies pricing power over U.S. competitors.
Currency moves tend to be fickle, making bold steps to counter them all the riskier. This time, however, fundamentals seem stacked in favor of continued dollar strength—emboldening executives.
“We are going towards parity, the question is when exactly it will arrive,” said Bob Kunze-Concewitz, chief executive of Italian drinks maker Davide Campari-Milano SpA.
The euro recently was trading at $1.0718. The British pound, meanwhile, has fallen sharply against the dollar following the U.K.’s vote in June to leave the European Union.
As a general rule of thumb, every 10% rise in the value of the dollar translates into 3% more operating profit at Campari. In an interview, Mr. Kunze-Concewitz said he is scouting for acquisitions that could add to that exposure.
Earlier this year, Campari bought the maker of orange liqueur Grand Marnier—a French firm that counts more than half of its sales in the U.S.
Strong dollar has U.S. exporters bracing for tough times; in Europe, looking to increase exposure
December 7, 2016 by Leave a Comment