(RTTNews) - European non-financial companies will be affected by the volatility witnessed in currency markets in 2008, Moody’s Investors Service said, Thursday. There were more than 500 corporate families in the Europe Middle East Africa, EMEA, area reporting in various currencies like the U.S. dollar, the euro, sterling, Turkish lira and the South African Rand.

Real operational issues may emerge as a result of currency mismatches, the Moody’s said. For instance, UK retailers may import goods in U.S. dollars or the euro and sell in sterling pounds. Such companies may be faced with a cost-revenue mismatch and could lead to declining operating margins. Some companies may even loose their competitive edge, according to the Moody’s.

“The vast majority are affected by currency volatility either as a result of their international operations, or even those that operate within national boundaries, by purchases or sales made in foreign currencies or borrowings in the global capital markets. Moreover, the effects are not confined to particular industries, locations or reporting currencies, but are specific to the individual operations of each issuer,” Philip Robinson, Moody’s Vice-President, Senior Accounting Analyst said.

On the other hand accounting for foreign exchange transactions could raise false signals of deteriorating credit metrics when in fact the fundamentals were sound. “Careful analysis of the complete, but often complex picture is needed to ensure that the real risks and rewards are identified and both the immediate and the long-term effects are understood,” Philip Robinson observed.

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Posted in Categories: Economy, Eurozone, Releases, UK, USA.

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