With the dollar at its weakest point in a decade, protection against currency risk looms ever larger on the CFO's agenda. For U.S. manufacturers selling into Europe, the dollar's decline has been a boon, allowing them to accelerate overseas growth and boost earnings by 5 or 10 percent. But for other companies, particularly those based in Europe, the prospect of a permanently weaker dollar has heightened the need to diversify their operations, causing some to consider moving manufacturing facilities to a suddenly lower-cost United States. In Asia, rapidly rising currency values have CFOs thinking about ways to protect the margins on their extensive U.S. Sales.
While companies have long used financial hedges for short-term currency problems, the fact that businesses are changing their operations in response to the dollar's fall suggests they suspect that the greenback's weakness may be a long-term phenomenon. According to the most recent Duke University/CFO magazine Global Business Outlook Survey, a stunning 50 percent of Europe's CFOs and 60 percent of Asia's think the decline in the dollar represents a permanent devaluation. A third of their U.S. counterparts agree.
Source: CFO, http://cfo.com