Salient to Investors:
The Fed’s mixed messages on monetary policy are stoking volatility in the currency market, raising the odds that companies will have a harder time setting up exchange-rate hedges designed to protect overseas earnings.
Ulrich Leuchtmann at Commerzbank said if a high-volatility environment were permanent it would cause problems when people have to roll their hedge positions.
Chris Turner at ING said stop-go monetary policy communication among some of the world’s most powerful central banks is leading to much volatility. Turner said most agree that the dollar is set for quite a decent rally.
The dollar’s strength is contributing to a projected 1.5 percent decline in Q2 earnings for non-financial companies in the S&P 500 Index. Analysts expect at least three more quarters of weakening for the yen and euro, cutting the dollar value of goods sold overseas.
Click here to receive free and immediate email alerts of the latest forecasts.