"We are in a midst of an ugly contest to see whether the
eurozone, Japan or Canada can depreciate the most against the
U.S. dollar, and China is probably next," Campbell Harvey, a
finance professor at Duke University and a past guest on Newsmax
TV, said in response to the latest
Duke University/CFO
Magazine Global Business Outlook Survey.
"U.S. exporters are being punished by these competitive
depreciations, and this will lead to lower profits and less
employment."
The dollar has soared to multi-year highs against a range of
currencies in recent weeks. A rising dollar hurts U.S. companies
by making their exports more expensive in foreign currency terms
and reducing the value of their foreign revenue when translated
into dollars.
Many companies have recently cited the dollar's ascent as a
depressant on earnings.
"Foreign exchange is now a substantial headwind for us," John Kritzmacher, CFO of book publisher John Wiley & Sons, said in an earnings call last week, The Wall Street Journal reported.
"Foreign exchange is now a substantial headwind for us," John Kritzmacher, CFO of book publisher John Wiley & Sons, said in an earnings call last week, The Wall Street Journal reported.
Given that about 50 percent of the company's revenue is earned
overseas, "our results are adversely impacted by a strengthening
dollar, particularly with respect to the euro and the British
pound." The euro slumped to a 12-year low against the dollar
last week.
The dollar's rise also is deflationary for the U.S. economy, as
it lowers the price of our imports in dollar terms.
The surging greenback has led
economists surveyed by The Journal to project economic
growth of just 2.3 percent for this quarter, barely an
improvement from 2.2 percent in the fourth quarter.
Meanwhile, the pool of dollars overseas has exploded, thanks to
$9 trillion of outstanding borrowings by foreign entities.
And these excess dollars could create a major problem when the
Federal Reserve raises interest rates, wroted
Ambrose Evans-Pritchard, international business editor of The
Daily Telegraph.
That $9 trillion doesn't have "the protection of a
lender-of-last-resort [the Federal Reserve] able to issue
unlimited dollars in extremis," he noted. "The result [of the
dollar pool] is that the world credit system is acutely
sensitive to any shift by the Fed."
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