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Here's How Much the Strong Dollar Hurts American Companies

The dollar's strength caused a third of the recent decline in U.S. companies' foreign subsidiary profits
Yuan And Dollar Banknotes Ahead Of Tenth Anniversary Of China's Yuan Reform
Photographer: Xaume Olleros

American companies had a rough start to 2015 as they watched profits from overseas subsidiaries slide. Exactly how much blame should we assign to the currency markets? Two economists at the Federal Reserve have an idea. 

U.S. corporate profits fell about 1.4 percent in the fourth quarter last year before plummeting 5.2 percent in the first quarter this year, partly driven by a plunge in the amount American companies' foreign affiliates earned. Of the decline in overseas subsidiary profits caused by the appreciating currency and cheaper oil imports, about a third probably came specifically from the greenback, Carol Bertaut and Nitish Sinha wrote in a post this month.