Hedging against a Falling Dollar in World of Ups & Downs

10.06.2011
Pat Ryder, director of financial risk management at , spends much of his time these days keeping track of the euro and the yen.

European structural problems notwithstanding, the dollar has lost nearly 8% of its value relative to the euro so far this year. Japan, which has problems of its own, actually has seen its currency trade well against the dollar over the same period. This has created a profitable dynamic for U.S. manufacturers exporting overseas, a dynamic that could well reverse itself. It's Ryder's job, he says, to protect his company "against the strong dollar."

Ryder's outlook is not unique among finance professionals. "Right now, the concern is on the dollar and all of the major currencies are better valued than the dollar," according to Mary Ann Dowling, an analyst at Treasury Strategies. "The biggest issue for U.S. companies is really understanding where their exposure is, and how to hedge against it."

Eastman, when it was founded in the 1920s to supply chemicals to the photographic industry, both spent and made practically all its money in U.S. dollars. Since then, it has diversified -- in terms of product line, and end markets -- booking about half its $5.8 billion in 2010 revenue from customers outside the U.S. and Canada.

But the company, which has production facilities in nine countries, still makes most of its product in the U.S. "Most of our costs are in USD," Ryder says. "Our sales contracts are not."