News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Mixed
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Bitcoin and Ethereum look set to climb higher in the near term, as Citigroup and Goldman Sachs prove additional validation to the cryptocurrency market. Get your market update from @DanielGMoss here:https://t.co/uqdtJGoz1E https://t.co/b7Tz2ni9El
  • Commodities Update: As of 03:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.27% Silver: -0.06% Gold: -0.18% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/KVqNqaKSBq
  • Forex Update: As of 03:00, these are your best and worst performers based on the London trading schedule: 🇦🇺AUD: 0.14% 🇬🇧GBP: 0.06% 🇳🇿NZD: 0.04% 🇪🇺EUR: -0.04% 🇨🇭CHF: -0.06% 🇯🇵JPY: -0.13% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/eF87BJdT4j
  • British Pound Price Forecast: GBP/USD, GBP/JPY, GBP/CHF, EUR/GBP - https://www.dailyfx.com/forex/technical/home/analysis/gbp-usd/2021/03/03/British-Pound-Price-Forecast-GBPUSD-GBPJPY-GBPCHF-EURGBP.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Moss&utm_campaign=twr $GBP $EURGBP $GBPUSD $GBPCHF $GBPJPY https://t.co/qt3954gQ53
  • (Analyst Pick) Japanese Yen Outlook: USD/JPY May Fall But Broader Path Remains Bullish #Yen $USDJPY #JPY https://www.dailyfx.com/forex/analyst_picks/todays_picks/daniel_dubrovsky/2021/03/03/Japanese-Yen-Outlook-USDJPY-May-Fall-But-Broader-Path-Remains-Bullish.html?ref-author=Dubrovsky&QPID=917702&CHID=9 https://t.co/bGlHiuTCBn
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 91.52%, while traders in Germany 30 are at opposite extremes with 71.77%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/2Gl2SlMure
  • Update on #Cryptocurrencies #BITCOIN +2.89% #BITCOINCASH +3.09% #ETHEREUM +3.88% #RIPPLE +1.65% #LITECOIN +5.79%
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/GVZ0RT2Zh3
  • BoJ's Kataoka: Hard to see inflation nearing 2% Will keep making utmost effort toward price target - BBG #BoJ $JPY
  • 🇨🇳 Caixin Services PMI (FEB) Actual: 51.5 Previous: 52.0 https://www.dailyfx.com/economic-calendar#2021-03-03
US Firms Hold Cash as Dollar Rises, A Sign of Excess?

US Firms Hold Cash as Dollar Rises, A Sign of Excess?

Ryan Cox,

The rise in the U.S. Dollar (USD) over the last year has coincided with a rise in U.S. equities, best represented by the S&P 500 index. As the USD and S&P 500 have risen in tandem - to a point that might seem overstretched - investors are left wondering how far their climb may extend.

Since the beginning of 2015 the USD and S&P500 have transitioned to some means of consolidation following remarkably strong advances from both in the preceding year/years. U.S. corporate earnings over this same period have seen a moderation in their growth rate to a 2% pace compared to the average rate of 7.61% over the past seven decades. At the same time, U.S. companies have benefited from borrowing at historically low interest rates, and revenues have reflected exceptionally healthy gains.

These revenue gains are well represented in the industry leaders; especially in the information technology sector such as Apple, Google, Facebook. That said, with the rising USD these companies have seen an increase in competition from importers as their exports have becoming more expensive in weakening foreign markets. As multinational corporations they have also seen substantial increases in their cash holdings and foreign reserves.

US Firms Hold Cash as Dollar Rises, A Sign of Excess?

Chart Created in Excel, Data from Bloomberg and FXCM

With this competing forces U.S. corporations are experiencing between rising revenues and increased completion from foreign importers, there has been a demonstrable impact on earnings. To stay competitive companies such as Facebook have had to increase spending costs in R&D. In Facebook’s most recent earnings release, they said they have been making increased investments in infrastructure.

Facebook also stated they ended the 2Q of 2015 with $14.1 billion in cash and investments. They are not the only company to be holding large amounts of cash on hand, Apple has $203 billion in cash and securities, Google $70 billion, and Microsoft with $97 billion. U.S. companies are holding on to so much cash that they can readily invest, yet long-term investments have been seen declining. Many companies have been opting to give that cash to investors in the form of dividends, as well as stock buybacks. This has generated some concern as to why U.S. companies are holding on to so much cash and not making the long term investments that would signal a healthier economy.

US Firms Hold Cash as Dollar Rises, A Sign of Excess?

Chart Created in Excel, Data from Bloomberg and FXCM

The USD has already benefit an outlook for Fed rate hikes as the anticipation of higher (and competitive) yields draws capital to the currency. Yet, with the rise in rates there will also be an increase in the borrowing costs to U.S. corporations. Though the Fed’s pace for removing accommodation will likely be slow, the increase in borrowing cost will hurt firms’ ability to finance operations with cheap money. This high and rising holding in cash may indicate an anticipation in rates and could indirectly shift the direction for capital markets.

If the Fed raises rates, the US markets may generally reap the benefit of capital inflows into the country – particularly the Dollar. However, where the currency enjoys the natural buoyancy, corporate profits in the US firms may be pressured and subsequently lead stocks to lower market valuations as a result.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES