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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: 259117

Reported Deaths: 5668
CountyCasesDeaths
DeSoto17331186
Hinds16373328
Harrison13731199
Rankin10854217
Jackson10557187
Lee8922141
Madison8335166
Jones6483112
Forrest6038120
Lauderdale5965187
Lowndes5425118
Lafayette503193
Lamar490865
Washington4826124
Bolivar4024109
Oktibbeha397681
Panola374680
Pontotoc369855
Monroe3591105
Warren3569100
Union348063
Marshall347769
Neshoba3413152
Pearl River3329103
Leflore3059107
Lincoln299386
Sunflower288271
Hancock282559
Tate274362
Alcorn267454
Itawamba265260
Pike264679
Scott250847
Prentiss248252
Yazoo247356
Tippah244450
Copiah243949
Coahoma242254
Simpson238368
Leake232966
Grenada220671
Covington215072
Marion215073
Adams207870
Wayne203232
Winston202667
George201939
Newton195044
Attala194659
Tishomingo191661
Chickasaw185744
Jasper174438
Holmes169168
Clay161335
Tallahatchie148235
Stone145921
Clarke141762
Calhoun137621
Smith122725
Yalobusha119134
Walthall112836
Noxubee111423
Greene111029
Montgomery110136
Carroll105321
Lawrence103217
Perry102831
Amite98826
Webster93924
Tunica87421
Claiborne86625
Jefferson Davis85827
Benton83323
Humphreys83324
Kemper78420
Quitman6969
Franklin67115
Choctaw61213
Wilkinson58825
Jefferson55419
Sharkey44017
Issaquena1596
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Alabama Coronavirus Cases

Cases: 429655

Reported Deaths: 6283
CountyCasesDeaths
Jefferson63040956
Mobile30794557
Madison27486201
Tuscaloosa20996268
Montgomery19352315
Shelby18833120
Baldwin16653184
Lee12749102
Morgan12389119
Etowah11861176
Calhoun11292201
Marshall10290113
Houston8746156
Limestone813276
Cullman8125106
Elmore7999104
DeKalb776599
Lauderdale768698
St. Clair7651121
Talladega6309108
Walker5954174
Jackson586341
Colbert539873
Blount537683
Autauga525755
Coffee450456
Dale402981
Franklin369948
Russell340711
Chilton338966
Covington332668
Escambia326043
Dallas308896
Chambers293170
Clarke287833
Tallapoosa2641107
Pike255230
Marion248953
Lawrence246649
Winston229535
Bibb218847
Geneva205446
Marengo202829
Pickens197531
Hale179542
Barbour176036
Fayette172928
Butler170858
Cherokee161930
Henry156523
Monroe149818
Randolph142135
Washington139126
Clay127645
Crenshaw121544
Cleburne119023
Lamar119021
Macon118637
Lowndes112036
Wilcox105121
Bullock101128
Perry99019
Conecuh95720
Sumter89626
Greene76623
Coosa61015
Choctaw51624
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