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Currency hit to N. American companies seen 'bad' after rough Q2 -report

FILE PHOTO: U.S. hundred dollar bills

By Caroline Valetkevitch

NEW YORK (Reuters) - A surging U.S. dollar is likely to weigh even more on North American companies' third-quarter results than in the prior quarter, when the currency impact was the worst since at least 2013, treasury and financial management firm Kyriba said in a report on Tuesday.

Against a basket of currencies, the dollar advanced 6.5% for the quarter ended June 30. For the quarter ended Sept. 30, the index advanced 7.1%. The dollar has been rallying as the U.S. Federal Reserve has been aggressively raising interest rates in order to cool inflation.

The collective exchange rate hit, including on companies in the United States, Canada and Mexico, was a whopping $34.25 billion in the second quarter of this year. That compares with a $14.66 billion negative effect in the first quarter of 2022, Kyriba said in its report.

Positive and negative impacts overall in the second quarter for both North American and European multinational companies reached $49.1 billion in the second quarter, also the highest level of currency impacts recorded by the firm for a single quarter.

"We expect this to be at least as bad in Q3 due to the rise of the USD and drastic increase in FX volatility," said Bob Stark, Kyriba's global head of market strategy, in an email.

S&P 500 companies have just begun reporting results on the third quarter of 2022, with analysts' estimates for year-over-year earnings on the quarter down sharply since July 1, based on IBES data from Refinitiv.

A stronger dollar makes U.S. exporters' products less competitive abroad while hurting U.S. multinationals that need to exchange their earnings into dollars.

(Reporting by Caroline Valetkevitch; additional reporting by Saqib Iqbal Ahmed in New York; Editing by Nick Zieminski)