Tags: dollar | US | economy | companies

Caterpillar CEO: 'Rising Dollar Won't Be Good for US Economy'

By    |   Wednesday, 28 January 2015 12:06 PM

The surging dollar, which has reached multi-year highs against a range of currencies in recent weeks, is taking a hefty chunk out of many U.S. companies' earnings.

And that means pain for the economy as a whole, say Doug Oberhelman, CEO of Caterpillar, one of the companies affected.

"The rising dollar will not be good for U.S. manufacturing or the U.S. economy," he said in a conference call with analysts and investors Tuesday, The Wall Street Journal reports.

A strong dollar reduces the revenue earned by U.S. companies overseas, because that revenue is now worth less when converted from foreign currencies into dollars. An ascendant greenback also depresses U.S. companies' exports by making them more expensive in foreign currency terms.

Weaker corporate earnings translate to weaker hiring and lower wages, which means weaker consumer spending.

Other companies whose fourth quarter earnings were hurt by dollar strength include Johnson & Johnson, Procter & Gamble and Microsoft.

The euro hit an 11-year low against the dollar Monday, and many experts think the single European currency will fall much further.

"Parity is in the future for the euro," Craig Johnson, senior technical research strategist at Piper Jaffray, told
CNBC and Yahoo Finance's Talking Numbers. Parity would mean the euro trades at $1.

"It's in everybody's best interest to see that currency [the euro] cheaper, so they can improve their exports. And it's ultimately positive for the entire globe," he said. A weaker currency boosts a nation's exports by making them cheaper in foreign currency terms.

The euro touched a record low of $0.8252 in October 2000. It hasn't traded below $1 since December 2002. The euro began trading in January 1999.

"Since about 2003, we've been making a big distributional top" for the euro, Johnson said. "We broke through key support at about $1.20. The next real support comes in around basically $1.05 to $1.10."

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The surging dollar, which has reached multi-year highs against a range of currencies in recent weeks, is taking a hefty chunk out of many U.S. companies' earnings.
dollar, US, economy, companies
313
2015-06-28
Wednesday, 28 January 2015 12:06 PM
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