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European corporates bear the brunt of US$9.82bn FX losses

In a stunning turnaround, Kyriba’s Currency Impact Report (CIR), a report detailing the impacts of foreign exchange (FX) exposures from the global leader of cloud finance, treasury and IT solutions, revealed European multinational corporations suffered the brunt of the US$9.82bn reported lost due to currency volatility in the third quarter of 2020. 

Foreign exchange losses increased 126% in a single quarter for European companies, causing more than US$7.61bn in FX losses. North American corporations, by comparison, contained their losses as a result of currency volatility to US$2.21bn - the ninth largest impact since 2017, despite a weaker US dollar and low volatility. Kyriba’s CIR details the impact of FX among 1,200 multinational companies based in North America and Europe.

117 North American and European corporates reported global headwinds in the quarter, a modest decrease from the previous quarter's 290. 

“This quarter should be a wake-up call for corporations that haven’t taken the necessary steps to actively manage risks across the enterprise," said Wolfgang Koester, chief evangelist for Kyriba. "Market conditions resulted in dire consequences for European companies that didn’t put in place the means to address currency exposure risks; and for North American companies to suffer billions in losses due to currency volatility and low US dollar volatility is unwarranted and totally preventable. It’s absolutely clear that CEO’s and their finance chiefs must be better prepared to manage currency exposure and mitigate impacts from future headwinds, as these past months are signalling a weakening dollar yet to come.”

Currency volatility

For the first time since 2019, North American companies indicated the euro (EUR) as the most impactful currency, with 24% of companies referencing the euro in their Q3 earnings calls. The Brazilian real (BRL) fell out of the top spot and was the third most referenced currency.

The Chinese yuan renminbi (CNY) was the third most impactful currency for North American companies, followed by the Mexican peso (MXN) and Korean won (KRW). 

The average earnings per share (EPS) impact from currency volatility reported by North American companies in Q3 2020 remained at US$0.04 - four times greater than the industry standard MBO of less than US$0.01 EPS impact.

The top five industries that experienced the greatest impact from currencies in North America were health care, machinery, professional services, technology and biotech. The top 5 industries that reported the greatest impact for Europe were communication services, electronics, biotech, chemicals and health care.

The US dollar replaced the euro as the currency most mentioned as impactful by European companies during Q3 2020 earnings calls, followed by the Brazilian real, with the euro ranked third.

Methodology

The Kyriba Currency Impact Report is a report detailing the impact of foreign exchange exposures among publicly traded companies. All companies in the report do business in more than one currency, with at least 15% of their revenue coming from nations that are located outside of their headquarters.

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