January 31, 2023

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A strong dollar hits American companies abroad hard

A strong dollar hits American companies abroad hard

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  • Car manufacturer Tesla was in the spotlight this week as it sold a large portion of its investment in Bitcoin.
  • However, for many US companies that operate internationally, the Bitcoin decline is not a big problem.
  • A stronger dollar is more worrisome, said Joost Derks, currency expert at iBanFirst.

Analysis – Automaker Tesla posted a profit of more than $2 billion in the second quarter of this year. But the main focus was on the company’s news that its three quarters Bitcoin sold shares.

The incumbent isn’t the only company making electric cars The largest crypto currencyThe value has halved since the beginning of this year.

However, for many US companies that operate internationally, a strong dollar poses a much bigger problem than the Bitcoin explosion.

“The dollar is our currency and your problem”. This statement by former US Treasury Secretary John Connally sums up the US attitude towards the dollar very well. Although currency is an important lubricant for world trade, the country makes no effort to influence price direction.

In the past, it has often been the case that other countries have been heavily affected by dollar exchange rate fluctuations. However, quarterly figures released by listed companies show that the US business community is currently feeling the pain.

Many US companies have an earnings forecast for the current year should be reduced. Foreign profits will suddenly be much smaller as they are converted to an expensive dollar.

Failures in the crypto market add additional pressure for investors to better protect themselves

Much has been written about rising US interest rates Boosts the dollar. Less is known about the dynamics behind Bitcoin’s decline. One reason is that many trading platforms are in serious trouble. For example, a week ago, Cryptobank Below is the Celsius cup.

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Celsius has built a net worth of over $10 billion by offering high interest rates to customers who deposit bitcoins and other cryptocurrencies. Crypto assets are invested for the long term. However, due to the sharp decline in the price of Bitcoin and other cryptos, customers started demanding their deposits. Since the invested capital was tied up for a long period of time, Celsius did not have enough liquid assets to repay the deposit.

In the short term, problems with Celsius and similar platforms contribute to the negative news flow surrounding cryptocurrencies.

On the other hand, it paves the way for measures to better regulate crypto trading. This is because, although Bitcoin and other currencies owe some of their popularity, official institutions such as central banks have no influence on exchange rates, and no one benefits from violent exchange rate fluctuations and bankruptcies like Celsius.

Joost Derks is a currency expert iBanFirst. He has over twenty years of experience in the currency world.