The US dollar is making a huge comeback

The once puny dollar is starting to look mightier again. And that could be bad news for Corporate America.The ...

Posted: May 2, 2018 3:27 PM
Updated: May 2, 2018 3:27 PM

The once puny dollar is starting to look mightier again. And that could be bad news for Corporate America.

The US Dollar Index, which measures the value of the greenback against the euro, the yen and several other major global currencies, has been on a tear. It's risen more than 3.5% in just the past two weeks and is now up slightly for the year.

It wasn't that long ago that the dollar was languishing, and big companies such as Nike, Costco, Oracle and FedEx were crediting the weaker dollar for boosting their earnings.

A weaker dollar lifts the profits of multinational companies because it makes their products less expensive in foreign markets. There's an accounting benefit, too: Companies get to report higher revenue from abroad when they translate their international sales back into dollars.

So the dollar's rally is suddenly turning into a problem.

The chief financial officer of the cruise company Royal Caribbean, which is headquartered in Miami, said last week that the greenback's rebound ate into profit for its most recent quarter.

The CFO of Iron Mountain, a Boston data storage company, noted in its earnings call that it had benefited from "favorable currency translation" in the first quarter - but warned that exchange rates may not provide a similar lift for the remainder of the year.

Apple even acknowledged in its earnings call Tuesday that a stronger dollar could hurt profit.

"Because about two-thirds of our company is outside the United States, a weak dollar is a positive for our gross margins," said Apple chief financial officer Luca Maestri. "A strong dollar, as it's been during the last four years, has been a bit of a headwind."

Many analysts think this will continue because the Federal Reserve is expected to raise interest rates at least two more times this year, and perhaps three more times in 2019. That could boost the dollar further, especially because the European Central Bank isn't likely to hike rates anytime soon.

Related: The Fed is likely to hike rates faster than once thought

Lukman Otunuga, research analyst at currency brokerage firm FXTM, wrote in a report Wednesday that an improving US economy should lead to "rising inflation expectations supporting the prospect of higher interest rates" from the Fed.

So Otunuga thinks the dollar could keep hitting new highs for the year as long as the economy keeps gaining momentum.

All eyes will turn next to Friday's jobs report. A better than expected number of jobs added could lead to even more optimism about the economy, which should lift the dollar further.

Boris Schlossberg, managing director of currency strategy for BK Asset Management, said in a report early Wednesday that "a solid 200K print from ADP" could boost the dollar.

Schlossberg was referring to the widely watched private sector jobs number, which the payroll processing and HR company ADP puts out days before the official government report. ADP said Wednesday that 204,000 jobs were added - and the dollar immediately rallied on the news.

So if the official jobs number on Friday is similarly strong, the dollar could keep rallying. And it will be interesting to see how the Trump administration reacts.

President Trump once touted the benefits of the weak dollar, but he has changed his tune in recent months.

After Treasury Secretary Steven Mnuchin described a weaker dollar as "good for trade," Trump told told CNBC in January that the dollar will get "stronger and stronger."

It looks like he was right. The dollar is enjoying a resurgence. The question is whether that will do more harm than good for giant US companies, the stock market and the broader economy.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 320174

Reported Deaths: 7390
CountyCasesDeaths
DeSoto22294271
Hinds20755424
Harrison18450317
Rankin13923282
Jackson13733249
Madison10273225
Lee10063176
Jones8473167
Forrest7837153
Lauderdale7263242
Lowndes6523150
Lamar636288
Lafayette6314121
Washington5427138
Bolivar4841133
Panola4671110
Oktibbeha466398
Pearl River4606148
Marshall4574105
Warren4440121
Pontotoc425973
Monroe4162136
Union415877
Neshoba4065180
Lincoln4009113
Hancock387687
Leflore3516125
Tate342586
Sunflower339491
Pike3373111
Alcorn327474
Scott320374
Yazoo314571
Adams308486
Itawamba305178
Copiah299966
Coahoma299084
Simpson298689
Tippah292268
Prentiss284261
Leake272374
Marion271280
Covington267283
Wayne264842
Grenada264087
George252451
Newton249064
Tishomingo232369
Winston230282
Jasper222148
Attala215173
Chickasaw210659
Holmes190574
Stone188733
Clay187954
Tallahatchie180041
Clarke178980
Calhoun174232
Yalobusha167940
Smith164134
Walthall135447
Greene131834
Lawrence131224
Montgomery128643
Noxubee128034
Perry127538
Amite126342
Carroll122330
Webster115032
Jefferson Davis108334
Tunica108127
Claiborne103130
Benton102325
Humphreys97533
Kemper96729
Franklin85023
Quitman82316
Choctaw79118
Wilkinson69632
Jefferson66328
Sharkey50917
Issaquena1696
Unassigned00

Alabama Coronavirus Cases

Cases: 549013

Reported Deaths: 11311
CountyCasesDeaths
Jefferson810461571
Mobile42145831
Madison35718525
Tuscaloosa26179458
Shelby25626254
Montgomery25089614
Baldwin21901314
Lee16287176
Calhoun14724327
Morgan14639285
Etowah14183364
Marshall12454230
Houston10791287
Elmore10301214
Limestone10188157
St. Clair10161251
Cullman9958201
Lauderdale9612250
DeKalb8977190
Talladega8462184
Walker7341280
Autauga7242113
Jackson6953113
Blount6950139
Colbert6415140
Coffee5638127
Dale4930116
Russell454941
Chilton4478116
Franklin431782
Covington4279122
Tallapoosa4144155
Escambia401880
Chambers3728124
Dallas3610158
Clarke353161
Marion3245107
Pike314578
Lawrence3134100
Winston283572
Bibb268564
Geneva258481
Marengo250665
Pickens237062
Barbour234559
Hale227178
Butler224671
Fayette218962
Henry194443
Randolph187644
Cherokee187345
Monroe180641
Washington170739
Macon163051
Clay160159
Crenshaw156357
Cleburne153644
Lamar146937
Lowndes142254
Wilcox126930
Bullock124542
Conecuh113630
Coosa111629
Perry108626
Sumter105832
Greene93634
Choctaw62125
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