Which startups will benefit the most from the greenback’s strengthening? And will changes in the value of major currencies lift any particular region?
The US dollar is having a good year. The US dollar index, which tracks the value of the dollar against other currencies, for example, hit a low of about 95 points in early January. The benchmark has since risen to 106.69 year-to-date – and we’ve seen the US dollar reach parity with the euro, with the latter enjoying a 20-year premium to the former.
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The changing relative value of major currencies affects technology revenues. US tech giants, for example, reported big currency-related impacts on their second-quarter results. Microsoft grew 12% in the second quarter of 2022 – but 16% if you strip out the impact of currency fluctuations. The same issue cost Microsoft 5 percentage points of net income growth over the same period.
Microsoft wasn’t alone. Outgoing Meta COO Sheryl Sandberg said during her company’s latest earnings report that changing currency values ”had a significant impact in Q2, in particular the depreciation of the euro against the dollar”. Indeed, the now infamous year-over-year revenue decline that Meta reported in the second quarter would actually be 3% revenue growth if the currencies stayed, Sandberg said.