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The Honolulu Advertiser
Posted on: Sunday, July 21, 2002

Falling dollar lifts U.S. exporters' earnings

By Mark Tannenbaum
Bloomberg News Service

NEW YORK — Planning ahead, Lars Jolsrud bought dollar travelers checks in April before leaving Norway for a round-the-world trip.

Procrastination might have been better. The Norwegian krone soared 18 percent in the past three months and is the world's strongest currency against the dollar this year.

"I would have gotten a much better rate if I had waited until I came to New York to change money," said Jolsrud, 32, taking a tourism break by the FAO Schwarz toy store in Manhattan.

The dollar's unexpected decline, on the other hand, is what the world's biggest economy needs to help boost earnings at U.S. companies with overseas sales, say executives.

The drop "works to our advantage" at United Parcel Service Inc., said Gary Barth, assistant treasurer, because 14 percent of the Atlanta-based delivery company's sales last year came from international operations.

A sinking dollar raises the value of U.S. companies' earnings in other currencies and makes prices of American-made goods more competitive relative to products of foreign companies.

The dollar fell 12 percent against the euro in the last quarter — its biggest quarterly drop since the European common currency's January 1999 introduction.

The decline accelerated as accounting scandals at U.S. companies undermined confidence in corporate earnings, as well as in the U.S. economy.

Goodyear gains

With U.S. stocks posting their steepest first-half slump in more than three decades, and 10-year Treasury yields near seven- month lows, the United States has suddenly lost much of its appeal for foreign investors.

Still, the dollar's rapid fall against the euro benefited many U.S. manufacturers. It was one reason Goodyear Tire & Rubber Co., North America's largest tire maker, raised its second-quarter profit forecast last month, said spokesman Keith Price.

The weaker U.S. currency has reversed a decline in export orders, which last month reached their highest level since March 2000, the Institute for Supply Management said. The fall in exports had cost 750,000 U.S. factory jobs, according to the National Association of Manufacturers in Washington.

'Very good news'

"A weak dollar would be very good news" for corporate profits and help spur economic growth, said Robert Delucia, who helps oversee $47 billion at TimesSquare Capital Management Inc.

Aside from U.S.-based multinational companies, the tourism industry should also benefit, as visitors from abroad feel flush with extra cash and boost spending.