Foreign Currency Effect

Foreign Currency Effect

The gain or loss on an investment denominated in a foreign currency due to changes in the exchange rate. For example, a rising domestic currency will result in a loss in a foreign investment because each foreign currency unit converted will result in fewer domestic currency units. The opposite is true for a falling domestic currency or a rising foreign currency. Foreign currency effects theoretically do not occur with pegged currencies if the foreign currency is pegged to the domestic one or vice versa. See also: Foreign exchange risk, Sovereign risk.
References in periodicals archive ?
"This reduction in capacity should benefit (passenger-unit revenue) and reduce the negative foreign currency effect."
Risk-weighted assets were flat including a negative EUR3 billion foreign currency effect, which offset an underlying increase mainly due to an operational risk component.
Growth at Survey and the revenue contribution from Seabed Geosolutions were partly offset by lower multi-client sales and a negative foreign currency effect of 4.6%.
For the full year fiscal 2019, the company now expects flat to modest organic sales growth and unfavorable foreign currency effects of approximately 2 percent on sales as compared to the prior year.
Foreign currency effects increased earnings in the 2019 second quarter by $15 million.
Consolidated sales revenue for the fiscal first quarter (April 1, 2019 through June 30, 2019) amounted to 3,996.2 billion yen, a decrease of 0.7% compared to the same period last year, due primarily to a decrease in sales revenue such as automobile and motorcycle businesses as well as unfavorable foreign currency effects. This was despite an increase in sales revenue from financial services business.
Honda's consolidated sales revenue for the three months ended June 30, 2019 decreased by 0.7%, to JPY 3,996.2 billion from the same period last year, due mainly to decreased sales revenue in Automobile business, Motorcycle business, Life creation and other businesses operations as well as negative foreign currency effects, which was partially offset by increased sales revenue in Financial services business operations.
Honda attributed this to "an increase in selling, general and administrative expenses, a decrease in profit related to changes in sales volume, and model mix resulting from a decrease in automobile unit sales in the US and a decrease in motorcycle and automobile unit sales due to the slowdown of the Indian market, as well as unfavourable foreign currency effects".
* Net revenues down 38%, primarily due to lower volumes partially offset by positive foreign currency effects
Lower revenues resulted from the divestiture of the Brattleboro mill in December 2018, unfavorable foreign currency effects in Technical Products, and lower volumes in both segments reflecting weaker global market conditions.
According to the bank's disclosures before foreign currency effects, the decline was less severe than most peers'.
Foreign currency effects decreased earnings in the 2017 fourth quarter by $96 million.
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