Kyriba reveals $95 billion currency effect in global liquidity report

Kyriba has released its quarterly Currency Impact report, detailing that the total currency effect for 2023 was $95 billion. Derived to give more information on how foreign exchange impacts a multinational's revenue, earnings, and cash flow, it is a reflection of an analysis of 1,700 public European and North American companies. Their earnings reported in Q4 2023 showed a $14.67 billion total ($6.8 billion headwinds and $7.87 billion tailwinds), culminating in a total annual currency effect for 2023 of $95 billion, against the 2022 total of $169 billion.

The report offers some key findings concerning European organisations. The overall FX-related losses of European companies were $4.17 billion, a considerable drop of 53.5% compared to the previous quarter. Of the 850 European multinationals analysed, 12.4% reported headwinds in Q4 2023 and a quarter of these explained their adversarial impacts. The currencies most highlighted in European earnings calls, in order, were the euro, US dollar, and Swedish krona, with the euro and the British pound being the most volatile.

"Following two sequential quarterly increases in negative currency impacts to North American and European companies, we noticed a downward trajectory for currency impact as 2023 came to a close. This signifies a suitable moment for CFOs to break free from liquidity stagnation," commented Melissa Di Donato, Chair and CEO at Kyriba. She expressed that given the current context of the currency markets, businesses should keep a close eye on managing and monitoring their currency risk.

Andy Gage, Senior Vice President of FX Solutions and Advisory Services, Kyriba, highlighted that Q4's results were "a byproduct of the relative weakening of the US dollar, which is why we saw a significant falloff in headwinds and a rise in tailwinds." He warned that the surprising US dollar strength observed in the first half of 2024 may lead to more reported headwinds for US corporations in 2024, in particular.

This report's highlights include a remarkable 62.7% decrease in headwinds to $2.63 billion for publicly traded North American companies, with tailwinds of $9.63 billion, down from 52.1% in Q3 2023. The average earnings per share (EPS) impact reported by these companies in Q4 2023 was $0.04, four times greater than the industry standard MBO of less than $0.01 EPS impact. In North American earnings calls, the euro was the most mentioned currency, followed by the Chinese renminbi. Then in subsequent mentions came the British pound, the Canadian dollar, and the Mexican peso, with the most volatility seen in the Mexican peso.

These insights reflect a global shift towards more financial vigilance, a factor that corporations managing foreign trade and exchange must consider. Movements within the currency market demonstrate the need for multinational corporations to manage their currency risk effectively and remain aware of global economic changes influencing currency volatility.