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Wild Currency Swings Shaved $29 Billion Off of Corporate Profits

Published 18/05/2023, 17:10
© Reuters.
JPM
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(Bloomberg) -- Volatile currencies once again wreaked havoc on North American corporate profits in the fourth quarter, underscoring the importance of hedging and risk management for firms that do business overseas.

Swings in global foreign-exchange markets cost the companies about $28.9 billion in the last three months of 2022, according to Kyriba Corp., a treasury-management software company. That puts the total amount of North American corporate profits lost due to currency moves last year at $121 billion, data show. 

Impact from the euro, Canadian dollar and yen were the most-frequently mentioned during the earnings calls of public companies with at least 15% of their revenue tied to foreign business, according to the firm’s analysis. The Australian dollar and Brazilian real were also cited.

JPMorgan Chase & Co (NYSE:JPM).’s gauge of global foreign-exchange volatility soared last year by the most since the global financial crisis in 2008. Traders in 2022 were contending with the impact of aggressive monetary tightening, stubborn global inflation and concern about economic growth and geopolitical risks.

Volatility this year, however, has already shown early signs of ebbing, with JPMorgan’s index sliding this week to its lowest since early 2022. 

Kyriba’s data also offered evidence of a slight easing of currency impact in the final stretch of 2022. For both European and North American companies, foreign-exchange moves caused $30.2 billion of damage in the fourth quarter, compared to a record $47.2 billion in the previous three-month period. 

©2023 Bloomberg L.P.

 

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