[Christian Harris]

The US dollar’s ascent over the past six months has cast a shadow over corporate earnings, with a wide range of companies reporting significant challenges due to unfavourable currency exchange rates.

This trend is particularly pronounced among multinational corporations with substantial international revenue streams.

Tech giants have been notably affected by the strengthening dollar.

Apple, which derived approximately 58% of its total revenue from international markets in the latest quarter, has signalled ongoing currency-related difficulties.

Similarly, other members of the “Magnificent Seven,” including Microsoft and Meta, reported that around 50% or more of their 2024 sales originated from overseas markets.

Amazon, despite having a lower international sales percentage at 23%, faced an unexpected $900 million foreign exchange headwind in Q4 2024.

This led the e-commerce behemoth to project its slowest quarterly revenue growth on record, with an estimated $2.1 billion adverse impact from currency fluctuations in Q1 2025.

The impact extends beyond the tech sector.

Consumer brands like McDonald’s have warned investors about the potential negative effects on their 2025 earnings per share due to currency challenges.

Coca-Cola has also factored in a 6% currency impact on its comparable EPS growth forecast.

The dollar’s strength is primarily attributed to two factors: the election of Donald Trump and the subsequent Republican dominance, coupled with a reassessment of future Federal Reserve policies amid strong economic indicators.

Since Trump’s election, the US Dollar Index has risen by approximately 4%, reaching near two-year highs in January 2025.

This currency trend is creating a complex environment for investors.

Morgan Stanley analyst Mike Wilson suggests that the strong dollar typically leads to increased variability in earnings per share adjustments during reporting seasons.

This scenario often results in a wider range of performance outcomes across market indices, potentially creating opportunities for selective stock picking.

As companies navigate these currency headwinds, investors are closely monitoring how effectively businesses can mitigate these challenges.

The ability to manage foreign exchange risks may become a key differentiator in corporate performance, particularly for those with significant exposure to international markets.

Sources: Trading Economics, eToro

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