Fitch: Further USD Appreciation Complicates Economy, Trade, Industrial Sectors
OREANDA-NEWS. Continued appreciation of the U.S. Dollar (USD) relative to the euro would affect net exports, with knock-on effects for GDP growth and several corporate industrial sectors, according to a new study by Fitch Ratings and Oxford Analytica.
"Central bank efforts to boost growth in developed markets may become more complicated, and industrial corporates could feel the pinch assuming monetary policies continue to diverge," says Eileen Fahey, Fitch Ratings' Chief Credit Officer.
The median company in Fitch's sample of industrial corporates could see revenue shifts of 2-3% annually based on a 20% currency swing in either direction between the USD/Euro, though more export-driven companies and industries may be subject to substantially more revenue volatility.
"Currency movements could further impact revenues in 2016 for companies with a significant amount of revenue tied to exports, particularly those in the capital goods, natural resources and oil & gas space which already face demand pressures from slower global growth and low commodities prices," says James Batterman, Managing Director, Credit Policy.
To date, companies in the eurozone have been the primary beneficiary of a stronger USD, primarily via stronger imports. However, further depreciation of the euro could drive stronger Eurozone net exports through 2017, supporting corporate revenues and earnings. Russian steel ore/potash companies, for example, have pocketed significant domestic receipts despite low commodity prices.
Other industrial sectors included in Fitch's study include autos, transportation, and chemicals.
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