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Dollar Dynamics

FIREapps' Wolfgang Koester deciphers how the dollar's frailty and comeback potential could wreak havoc on corporate financials

By Pat Wechsler | Updated on February 01, 2008

Q: What does the weak dollar mean in terms of FX-related accounting and exposure management practices?

A: The weakness of the dollar has meant windfall profits for most U.S. companies. These financial results, while positive on the surface, have served to obscure some very common problems about how companies manage multi-currency accounting and foreign exchange risk. Simply put, there are many multinational companies out there who simply have not accurately quantified their foreign exchange exposure. Today, with the weak dollar, that’s translated into unanticipated profits. When (and not “if”) the dollar begins to rise, those unanticipated profits will turn into unanticipated losses. To blame these losses on the vagaries of foreign currency volatility is simply unacceptable.

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