Previously we discussed how some U.S. multinationals are being negatively impacted from a strengthening dollar. The strengthening dollar also had a negative impact on a few U.S. automobile companies during the 2014 calendar year. These U.S. companies directly compete with Toyota and other Japanese automotive companies across the globe, and as the dollar strengthens against the yen, the U.S. companies become less competitive.
• General Motors – Reported earnings before interest and taxes (EBIT) of $6.5 billion, down $2.1 billion from the year before, with a loss of $1.3 billion attributed to foreign exchange6
• Ford – Reported pretax income of $4.5 billion for its automotive sector, down $2.4 billion from the year before, with a loss of $1.1 billion attributed to foreign exchange7
Hedge Your Currency Exposure
If the yen continues to weaken, Japanese exporters should continue to benefit. On the other hand, a weakening yen is not good for U.S. investors in Japanese equities—unless they hedge the currency. Currency-hedged strategies allow investors to focus on Japanese equities without the worry over currency declines.
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1Source: Toyota FY2015 3Q Financial Results, 2/4/15.
2Source: Bloomberg.
3Period is the first nine months of their 2015 fiscal years compared to the first nine months of their 2014 fiscal years.
4Source: Honda FY2015 3rd Quarter Financial Results, 1/30/15.
5Source: Mazda FY2015 Third-Quarter Financial Results, 2/4/15.
6Source: General Motors Q4 2014 Financial Results, 2/4/15.
7Source: Ford Q4 2014 Earnings Release, 1/29/15.
Important Risks Related to this Article
This information should not be considered a recommendation to buy, sell or hold the individual stocks referenced above.