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How FX volatility can eat away at corporate earnings

How are your company's cash flows affected by currency volatility? It's an important question and one that corporate treasurers are often expected to answer, to differentiate between actual earnings and overall figures affected by market factors. 

Fireapps's latest Corporate Earnings Currency Impact Report looks at the total negative currency impact for North American and European corporates in the first quarter of 2015, which was 57 per cent higher than in Q4 2014, according to the report. It was quadruple the negative impact seen in the same period in 2014.

The report lists the five currencies mentioned as having most impact on corporate earnings. Although the FX impact reported by North American corporates is now higher than during the peak of the euro crisis, the euro is far from being the only currency causing negative disruption to profits. 

Fireapps looked at company earnings for 1,200 companies and it found that 60 per cent said their earnings had been affected by FX volatility. This translates into a loss of $31.7 billion for companies based in North America and Europe in Q1 2015, compared with $20.2 billion during the last quarter of 2014.

The survey is available for download here

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