Dollar bulls see Donald Trump's plan to repatriate as much as$2.6 trillion in corporate profits stashed overseas as a can't-missboon for the greenback. The problem is most of that hoard mayalready be held in the U.S. currency.

Traders pushed the dollar up by the most in five years lastweek, partly in a wager that the president-elect's tax-amnestyproposals will fuel a surge in greenback demand.

Yet at Apple Inc., with the most overseas cash among S&P 500members, more than 90% of its $216 billion stash is in the U.S.currency, according to former employees who had direct knowledge ofthe matter and asked not to be identified. For Microsoft Corp., thesecond-largest holder of cash abroad, dollar-denominated bondsalone make up 66% of total cash, securities filing shows. The datasuggest that even if Trump is able to follow through with a taxamnesty similar to the one-time, 10% holiday he's proposed, itseffects on the world's reserve currency would be minimal.

“None of this information is explicitly disclosed, but most ofthe money is already in dollar-denominated securities,” saidRichard Lane, a senior analyst at Moody's Investors Service. “Allelse being equal, there shouldn't be direct impact on thedollar.”

While the U.S. tax code requires American corporations to paytaxes on overseas earnings, profits are only taxable when they'rereturned to the parent company. Hundreds of U.S. multinationalstherefore indefinitely reinvest their earnings offshore, withthe stash totaling $2.6 trillion in 2015, according to Congress'sJoint Committee on Taxation.

It isn't easy to pinpoint how much dollars companies holdoffshore. First, there's no official data from the government onthe tally. Second, firms are only required to give broad-strokedescriptions of the assets they own, and very few go into detailsof the currency component of the holdings. Third, companies don'tnormally break down their assets according to the country ofdomicile, making it tough for strategists and investors to identifythe location of any dollar-denominated securities.

If history is any guide, the effects of corporate repatriationon the greenback are often dwarfed by evolving monetary policiesand economic realities.

When Congress last enacted a tax holiday in 2004, 843 companiesbrought about $300 billion home at a reduced rate of 5.25%,according to government data. Even though the dollar strengthened13% the next year, the Federal Reserve's decision to almost doubleits benchmark interest rate to 4.25% was the primary driver of therally, according to JPMorgan Chase & Co.

To the world's second-biggest currency trader, any boost to thedollar would be equally insignificant this time around. The Fedwill be near the end of the current tightening cycle in about twoyears, just about when the overseas cash would be returninghome, blunting its already marginal impact, said John Normand,JPMorgan's head of foreign-exchange, commodities and internationalrates research. The central bank raised borrowing costs for thefirst time in almost a decade last December.

“The message from past experience is that relative monetaryshifts are more important and dominant to corporate repatriationflows in determining currency outcomes,” Normand wrote in a note toclients. “This issue of corporate profits repatriation is adistraction for currency markets.”

Good for Trump

Even though the first-order effects on the dollar may belimited, any tax holiday could still indirectly boost thegreenback, according to Steven Englander, global head ofGroup-of-10 currency strategy in New York at Citigroup Inc., theworld's largest foreign-exchange trader. The home-bound cash iscritical to funding Trump's proposed $500 billion to $1 trillioninfrastructure plan, which is intended to bolster economic growth.The program may also spur faster inflation, leading to higher bondyields and inflows into dollar-denominated assets, Englandersaid.

“Assuming it's a business-friendly deal, it'd support equities,”Englander wrote in a Nov. 9 report. “An equity rally willlikely pull long rates up. I think these will generate adollar-positive effect by attracting capital to the U.S.”

Stability, rather than strength, in the dollar might be justwhat Trump needs for his policies to succeed. He's vowed tooverhaul trade agreements and revive the nation's saggingmanufacturing and export sectors. A strong dollar makes Americanproducts more expensive to foreigners, and less competitive againsttrade rivals.

There might be limits to how much further the dollar can go,given it has already overshot analysts' year-end expectations. Thegreenback has rallied 3.5% since Nov. 8 to 108.80 yen, comparedwith the median forecast of 104 yen in a Bloomberg survey. Thecurrency will trade around that level and end 2017 at 109 yen,according to the consensus.

“We consider this issue to be too inchoate to justify owningdollars now,” JPMorgan's Normand said.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.