Magazine article American Banker

Dollar's Rise in Markets Expected to Have Little Impact on Bank Profits

Magazine article American Banker

Dollar's Rise in Markets Expected to Have Little Impact on Bank Profits

Article excerpt

U.S. multinational banks are shrugging off the dollar's recent rise.

Bankers and analysts estimated that the dollar's climb on foreign exchange markets, mainly relative to major European currencies, would have a negligible impact on first-quarter earnings.

"Most banks with big international operations are pretty well hedged," said Raphael Soifer, a banking analyst at Brown Brothers Harriman & Co.

There are other reasons banks are not likely to suffer much from currency fluctuations.

Much of the business U.S. banks do overseas, such as syndicated lending, is dollar-denominated to begin with. And some other currencies in which activity is strong, such as the Hong Kong dollar and Argentine peso, have values that are tied to the U.S. dollar.

Such currencies may fluctuate significantly against the German mark or Japanese yen, while staying stable against the dollar.

Also, the more the dollar goes up, the lower become local operating expenses overseas. Although bank earnings may slide slightly, this could well be offset by the expense reduction.

Since Jan. 1, the U.S. currency has climbed by more than 6% against the yen, to a rate of 124 to the dollar; 9% against the German mark, to 1.68; and 9% against the French franc, to 5.68.

But the dollar has been virtually constant versus the Hong Kong dollar and Argentinian peso.

U.S. officials have grown increasingly concerned that a further strong rise in the dollar could make the United States less competitive in international trade. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.