The US subprime mortgage crisis helped to push the dollar to new lows against the euro yesterday.
The dollar hit the new low of $1.3787 against the euro in early trade, also touching a 26-year low against sterling. By yesterday evening the dollar was trading at $1.3765 against the euro.
A firming in US stocks after Tuesday's sharp falls, as investors hedged their bets about the impact of a housing downturn, failed to lift the US currency.
The previous day's jitters had come after credit rating agencies issued warnings on more than $17 billion (€25 billion) of US mortgage-related debt. These subprime loans comprise about a fifth of annual mortgage debt in the US and any risks attached to them could threaten the banking sector.
Eamonn Hughes, an analyst with Goodbody Stockbrokers, said yesterday that Tullow, CRH and Norkom, along with food stocks Glanbia, Kerry and IAWS, were the Irish-listed companies most likely to be affected by a weakening dollar.
In a note to investors, Mr Hughes looked at how firms translate profits made in dollars into euro for reporting purposes. He notes, for example, that every one-cent move in the dollar is equivalent to just less than one cent being shaved off group earnings per share at CRH.
"Whilst we already have a weakening dollar built into our models, the sentiment impact of new dollar lows can't be dismissed," said Mr Hughes. He believes, however, that CRH's core European business should compensate for any dollar dilution.
Mr Hughes's analysis excludes companies reporting in dollars.
For the food stocks, the analyst noted that dollar translation may "give away" some of the benefit the companies are feeling in strong prices. Again, though, he takes comfort from the latest trading trends from firms such as Glanbia.
Ryanair is one of the few stocks that could benefit from dollar weakness in translation terms, Mr Hughes said.
Some 60 per cent of the firm's costs, including aircraft and fuel, are in dollars and the airline already has a rolling multi-billion dollar hedging programme to reflect this.
