A truck drives through Times Square in New York. Photographer: Yuki Iwamura/Bloomberg.
Tariffs unexpectedly devaluing the U.S. dollar—and in turn boosting corporate earnings—was one of the few bright spots of the first-quarter earnings season in North America.
Contrary to what analysts and executives expected at the beginning of the year, a Bloomberg gauge of the dollar has collapsed in recent months as investors have moved out of U.S. assets in response to the country’s tariff policies. The currency is down more than 6 percent since the beginning of the year, the worst start going back to the measure’s launch two decades ago.
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Companies including Meta Platforms Inc. and Microsoft Corp. now expect foreign exchange (FX) to boost their revenues by hundreds of millions of dollars, while McDonald’s Corp. sees an earnings lift of 5 cents a share for the year versus the previously anticipated negative impact of 20 cents to 30 cents per share.
The greenback has weakened “materially” in 2025 so far, a Morgan Stanley team led by Michael Wilson said in a recent note to clients. “This is serving as a tailwind for large multinationals with high foreign sales exposure.”
Positioning in the derivatives market suggests more losses ahead, albeit with diminished certainty following positive negotiations between the United States and China last week. One-month risk reversals on the Bloomberg Dollar Spot Index—a measure that indicates how much traders are willing to pay for put options relative to call options—are now the most bearish on the U.S. currency since March 2020.
That’s showing in corporate forecasts, too. Procter & Gamble Co.’s estimated FX impact, for example, has fallen by a third, to $200 million, compared with the start of the year. Airbnb Inc., which expected foreign exchange to be a drag for the year, now has a more positive view of currency impacts. “Fast forward to where we are today, it’s obviously less of a headwind,” CFO Ellie Mertz said during the company’s earnings call.
On the other hand, there are some companies for whom the recent dollar slump is a burden. One of them is Germany’s SAP SE, which generates a large proportion of its earnings in the U.S. dollar. The firm’s CFO expects a hit to earnings next year as currency hedges start to expire.
Still, some companies will likely see the benefits of a weaker dollar continuing. Despite some tariff concerns easing, “there’s a structural negative narrative for the dollar, which I think will stay in place,” Bloomberg Intelligence chief FX strategist Audrey Childe-Freeman said on a recent call.
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