oussama94
05-28-2017, 18:40
For stock market traders, particularly those who invest in European corporations
that export a tremendous amount of goods to the United States,
monitoring exchange rates are essential to predicting earnings and corporate
profitability. Since 2003, European manufacturers have complained
extensively about the rapid rise in the euro and the weakness in the U.S.
dollar. The main culprit for the dollar’s sell-off has been the country’s
rapidly growing trade and budget deficits. This caused the EUR/USD (euroto-dollar)
exchange rate to surge, which took a significant toll on the profitability
of European corporations because a higher exchange rate makes
the goods of European exporters more expensive to U.S. consumers. In
2003, inadequate hedging shaved approximately 1 billion euros from Volkswagen’s
profits, while Dutch State Mines (DSM), a chemicals group,
warned that a 1 percent move in the EUR/USD rate would reduce profits
by between 7 million and 11 million euros. Unfortunately, inadequate
hedging is still a reality in Europe in 2008, which makes monitoring the
EUR/USD exchange rate even more important in forecasting the earnings
and profitability of European exporters.
that export a tremendous amount of goods to the United States,
monitoring exchange rates are essential to predicting earnings and corporate
profitability. Since 2003, European manufacturers have complained
extensively about the rapid rise in the euro and the weakness in the U.S.
dollar. The main culprit for the dollar’s sell-off has been the country’s
rapidly growing trade and budget deficits. This caused the EUR/USD (euroto-dollar)
exchange rate to surge, which took a significant toll on the profitability
of European corporations because a higher exchange rate makes
the goods of European exporters more expensive to U.S. consumers. In
2003, inadequate hedging shaved approximately 1 billion euros from Volkswagen’s
profits, while Dutch State Mines (DSM), a chemicals group,
warned that a 1 percent move in the EUR/USD rate would reduce profits
by between 7 million and 11 million euros. Unfortunately, inadequate
hedging is still a reality in Europe in 2008, which makes monitoring the
EUR/USD exchange rate even more important in forecasting the earnings
and profitability of European exporters.