Moody's: Stronger US dollar is credit negative for US multinationals

The strong US dollar is modestly credit negative for US-based multinational corporations, according to a new cross-industry report from Moody's Investors Service. Large exporters in particular will face a choice between lower margins or higher prices as their products become less competitive in local markets. Moody's expect the US dollar to continue to rise against several major currencies this year, and especially against the euro.

The strong US dollar will have a negative credit impact on companies in the apparel, chemicals, consumer packaged goods, food and beverages, homebuilders, lodging and cruise companies, manufacturing, and coal and steel industries. Though Moody's analysts expect that many US multinationals will need to revise their 2015 guidance downwards, current hedging strategies will help most large exporters mitigate risk for at least the next six to 12 months.

"The stronger US dollar has already caught a number of US-based multinational corporations off guard, with many announcing hits to their fourth-quarter 2014 earnings attributable to foreign exchange and revising downwards their guidance for 2015," says Peter Abdill, Managing Director at Moody's Investors Service. "When currencies fluctuate, companies that earn revenues overseas are exposed to both 'translation' risk on their top lines and 'transaction' risk on their bottom lines."

The US dollar's rising value will only have positive credit implications for the metals and mining industry overall, Moody's says in the report titled, "Dollar Daze: Stronger Greenback is Credit Negative for US Multinationals."