Capital Markets Foreign Exchange After years of bemoaning the negative
effects of the strong dollar on their revenue and earnings, US - based multinationals are singing a different tune.
Not exact matches
The net
effect of the Ontario government's new policy is to subsidize jobs in an already
strong labour market, increase the wages
of already high - income workers and give hundreds
of millions
of dollars in corporate welfare to one
of the largest and most profitable companies in the world.
Recent export data are improving but are not
strong enough to make up for ground lost during the first half
of 2016, despite the
effects of the Canadian
dollar's past depreciation.
The RBA study pays special attention to the exchange rate appreciation, noting that the
stronger Australian
dollar had the
effect of moderating the
effects of resource price increases: higher exchange rates make all exports — including resource exports — less competitive on world markets.
The fact that many advanced economies are suffering from deficient demand and have policy rates at or near the zero bound and that the U.S.
dollar is a favored safe - haven asset may imply that adverse foreign demand shocks have a particularly
strong effect on the value
of the
dollar, effectively transmitting the weakness to the U.S. economy.
The sale
of its consumer health business to Bayer, and the negative
effects of a
stronger U.S.
dollar, have also weighed on results.
Nevertheless I do worry that the fall in exports from a
strong dollar is a bit
stronger than the rise in exports from a weak
dollar: I suspect because there is a hysteresis
effect: Once a factory is shut down, it stays shut down — and if firms don't continuously invest to stay at the cutting edge
of technology, it can be hard for a high - wage advanced economy to stay globally competitive.
A weaker
dollar tends to be beneficial for multinational companies, because it can support sales
of goods and services abroad, with a
stronger dollar having the opposite
effect.
The negative
effects of lower oil prices hit the economy right away, and the various positives - more exports because
of a
stronger U.S. economy and a lower
dollar, and more consumption spending as households spend less on fuel - will arrive only gradually, and are
of uncertain size.
Underlining the lack
of evidence for a rate rise, communicating that any change in policy would not come as a surprise or ahead
of schedule, and forecasting weaker US growth thanks in part to the
strong dollar had its desired
effect: but not for long.
The materials sector is 5 per cent lower than at end October and has shown considerable volatility during the period because
of the conflicting
effects of strong increases in metals prices and concerns about the appreciation
of the Australian
dollar.
Since US
dollar pairs constitute about 90 %
of all Forex trades that are taken, US economic news releases tend to have a much
stronger effect on price than news releases from any other session.
This looks great at the pumps
of course, but has a
strong negative
effect on other parts
of our economy, including the value
of the Canadian
dollar, which has been dropping rapidly.
I particularly agree that unless we also have a
strong dollar, the
effect of cutting taxes is diluted.