CLOSINGS: View Closings

The US dollar is making a huge comeback

The once puny dollar is starting to look mightier again. And that could be bad news for Corporate America.The ...

Posted: May 2, 2018 4:27 PM
Updated: May 2, 2018 4:27 PM

The once puny dollar is starting to look mightier again. And that could be bad news for Corporate America.

The US Dollar Index, which measures the value of the greenback against the euro, the yen and several other major global currencies, has been on a tear. It's risen more than 3.5% in just the past two weeks and is now up slightly for the year.

It wasn't that long ago that the dollar was languishing, and big companies such as Nike, Costco, Oracle and FedEx were crediting the weaker dollar for boosting their earnings.

A weaker dollar lifts the profits of multinational companies because it makes their products less expensive in foreign markets. There's an accounting benefit, too: Companies get to report higher revenue from abroad when they translate their international sales back into dollars.

So the dollar's rally is suddenly turning into a problem.

The chief financial officer of the cruise company Royal Caribbean, which is headquartered in Miami, said last week that the greenback's rebound ate into profit for its most recent quarter.

The CFO of Iron Mountain, a Boston data storage company, noted in its earnings call that it had benefited from "favorable currency translation" in the first quarter - but warned that exchange rates may not provide a similar lift for the remainder of the year.

Apple even acknowledged in its earnings call Tuesday that a stronger dollar could hurt profit.

"Because about two-thirds of our company is outside the United States, a weak dollar is a positive for our gross margins," said Apple chief financial officer Luca Maestri. "A strong dollar, as it's been during the last four years, has been a bit of a headwind."

Many analysts think this will continue because the Federal Reserve is expected to raise interest rates at least two more times this year, and perhaps three more times in 2019. That could boost the dollar further, especially because the European Central Bank isn't likely to hike rates anytime soon.

Related: The Fed is likely to hike rates faster than once thought

Lukman Otunuga, research analyst at currency brokerage firm FXTM, wrote in a report Wednesday that an improving US economy should lead to "rising inflation expectations supporting the prospect of higher interest rates" from the Fed.

So Otunuga thinks the dollar could keep hitting new highs for the year as long as the economy keeps gaining momentum.

All eyes will turn next to Friday's jobs report. A better than expected number of jobs added could lead to even more optimism about the economy, which should lift the dollar further.

Boris Schlossberg, managing director of currency strategy for BK Asset Management, said in a report early Wednesday that "a solid 200K print from ADP" could boost the dollar.

Schlossberg was referring to the widely watched private sector jobs number, which the payroll processing and HR company ADP puts out days before the official government report. ADP said Wednesday that 204,000 jobs were added - and the dollar immediately rallied on the news.

So if the official jobs number on Friday is similarly strong, the dollar could keep rallying. And it will be interesting to see how the Trump administration reacts.

President Trump once touted the benefits of the weak dollar, but he has changed his tune in recent months.

After Treasury Secretary Steven Mnuchin described a weaker dollar as "good for trade," Trump told told CNBC in January that the dollar will get "stronger and stronger."

It looks like he was right. The dollar is enjoying a resurgence. The question is whether that will do more harm than good for giant US companies, the stock market and the broader economy.

New York Coronavirus Cases

County data is updated nightly.

Cases: 2738968

Reported Deaths: 57593
CountyCasesDeaths
Kings35054010976
Queens32740410420
Suffolk2563293692
Nassau2267643335
Bronx2135936810
New York1771674667
Westchester1484542356
Erie1256852060
Monroe982241256
Richmond929811973
Orange62410944
Onondaga59728818
Rockland55617783
Dutchess38083510
Albany34583414
Oneida33390646
Niagara28947419
Broome28368435
Saratoga24878227
Schenectady19437245
Ulster19155292
Rensselaer17502193
Chautauqua15116197
Oswego14282135
Putnam13194101
St. Lawrence12945143
Chemung12916175
Steuben12556191
Ontario11776119
Jefferson11484106
Wayne10346103
Cattaraugus10082159
Cayuga9787113
Sullivan966390
Genesee8711144
Herkimer8394143
Clinton814648
Fulton7890115
Tompkins743161
Madison7412109
Warren737496
Livingston726377
Montgomery7246162
Washington675580
Tioga641373
Cortland611389
Allegany6028122
Columbia5753113
Chenango558796
Orleans556896
Franklin545126
Otsego541163
Wyoming535667
Greene496289
Delaware444352
Lewis424040
Seneca329368
Essex300538
Schoharie272324
Yates200434
Schuyler195420
Hamilton5163
Unassigned1402
Out of NY0340
Utica
Cloudy
40° wxIcon
Hi: 45° Lo: 32°
Feels Like: 35°
Oneonta
Cloudy
40° wxIcon
Hi: 46° Lo: 31°
Feels Like: 35°
Herkimer
Cloudy
40° wxIcon
Hi: 47° Lo: 32°
Feels Like: 35°
Old Forge
Cloudy
40° wxIcon
Hi: 40° Lo: 28°
Feels Like: 35°
WKTV Radar
WKTV Temperatures
WKTV Severe Weather
2022 WKTV Golf Card only $99.99
Game Day Deals - New Deals Each Week
Stuff the Bus Locations
Saluting Those Who Are Proud 2 Serve