Finance executives at large U.S. companies, including Coca-Cola Co. and Dow Inc., are increasing their foreign currency hedges and covering longer time periods as the strong dollar continues to take a toll on earnings, the Wall Street Journal reported. The dollar in recent quarters has surged against major international currencies as the Federal Reserve’s rate increases outpace those of other central banks, making higher-yielding dollar assets more attractive for investors. The Wall Street Journal Dollar Index is up nearly 15% since the beginning of the year. A strong dollar crimps income from abroad as it gets converted into fewer dollars. Finance chiefs and treasurers are responding by looking for additional protection, as they try to ensure that their overseas earnings are worth a certain amount when translated into U.S. dollars. Changes to companies’ hedge contracts include covering larger amounts of earnings as well as longer durations beyond the usual 18 to 24 months. There are growing indicators of the impact of the strengthening dollar on companies’ results and stocks. The number of S&P 500 companies that beat revenue expectations has declined as the dollar strengthened, with 38% of companies outpacing expectations through Oct. 31, compared with 45% in the second quarter and 49% in the first quarter. Share prices of S&P 500 companies with large overseas exposure are down about 23% since the beginning of the year, compared with 18% for the wider index and 6% for companies with largely domestic businesses. (Subscription required.)
