Q1 2024 sees major $9.83billion currency impact headwind
Kyriba has released its quarterly Currency Impact Report for Q1 2024, revealing a substantial negative currency impact amounting to USD $9.83 billion.
The report, which examines the effects of foreign exchange rates on the financial performance of global organisations, provides insights into how foreign exchange fluctuations affect revenue, earnings, and cash flow.
The report highlights that 11.5% of the 1,700 surveyed publicly traded companies in Europe and North America reported noteworthy positive or negative FX impacts, totalling USD $12.55 billion. This figure includes USD $9.83 billion classified as headwinds and USD $2.72 billion as tailwinds.
In North America, companies experienced a significant increase in the negative impact from currency movements, reporting USD $8.38 billion for Q1 2024. This represents a 219% increase compared to the previous quarter, signalling acute currency volatility in this region.
Contrastingly, European companies saw a decrease in FX-related losses, reporting USD $2.72 billion in Q1 2024. This marked a 65.2% reduction from the fourth quarter of 2023. Among the 850 Europe-based multinationals analysed, 8.5% reported experiencing headwinds during this period, and 36.1% of these companies quantified their negative impacts.
The US dollar was the most frequently mentioned currency in earnings calls for European companies, followed by the Swedish krona and the euro. The Turkish lira emerged as the most volatile currency in the quarter, while the euro was noted as the most volatile currency when weighted by GDP.
European industries most impacted by currency movements included construction and engineering, healthcare equipment and supplies, and auto components.
Discussing the findings, Melissa Di Donato, Chair and CEO at Kyriba, said: "Currency volatility continues to pose a substantial risk to multinational corporations, significantly impacting their bottom lines."
"Our latest report underscores the heightened challenges companies faced in the first quarter of 2024."
"More importantly, it reinforces the critical need for strategic currency risk management and the use of advanced predictive analytics to mitigate these risks and optimise liquidity performance," she added.
Andy Gage, SVP of FX solutions and advisory at Kyriba, also commented on the findings.
"The early 2024 trends are showing an unexpected strength in the US dollar, forecasting an increase in FX headwinds for US corporations for the second half of 2024," he said.
"Inflation, coupled with this strong dollar, is putting additional pressure on global economic stability, making it imperative for companies to employ robust risk management strategies."
In North America, key industries affected included healthcare equipment and supplies, machinery, trading, distribution, life sciences tools and services, electronic equipment, instruments and components, and chemicals.
The Argentinian peso was cited among the most impactful currencies by North American firms, along with the US dollar.
The Kyriba report underscores the importance of comprehensive risk management strategies to manage the financial challenges posed by currency volatility. The findings highlight how currency fluctuations can deeply affect multinational corporations' financial positions, urging a more strategic approach to mitigate risks associated with such volatility.
