The weak dollar exchange rate against the euro for months now is having a noticeable impact on German companies. Numerous companies are expecting significantly lower profits in the second quarter and a continuing burden from the unfavorable exchange rate.
At the end of February, the euro was still trading at around 1.05 dollars, and some were even expecting the currencies to reach parity. But the opposite has happened: Since the threat of high US tariffs in March, the US currency has been weakening, with one euro currently costing 1.17 dollars - a 14% appreciation of the euro.
Large companies with strong foreign operations are particularly affected by this. "In the Dax, that's almost all of them," says Jörg Held, Head of Portfolio Management at the fund company Ethenea. He warns that the weakness of the dollar is "becoming a measurable profit killer". Many experts believe that the negative impact of the currency constellation will not disappear for the time being.
Companies' results will come under pressure in two ways: products from export-oriented companies such as $P911 (+3,41%) Porsche become more expensive when their price is converted into dollars. Their competitiveness is weakened because competing products from companies in other currency areas with lower exchange rate fluctuations become comparatively cheaper.
"A ten percent appreciation of the euro reduces the profit growth of European companies by three to five percentage points over the course of a year," calculates Ulrich Stephan, Chief Investment Strategist at Deutsche Bank.
- BASF
$BAS (+0,16%) has lowered its forecast for 2025 by eight percent and now expects an adjusted profit of between 7.3 and 7.7 billion euros. Currency effects already depressed earnings in the second quarter. The negative effect on earnings is primarily due to the translation of earnings generated abroad into euros. In February, the world's largest chemical company was still expecting an exchange rate of 1.05 dollars per euro for the year as a whole. BASF is now assuming 1.15 dollars.
- SAP $SAP (+0,64%) sees a "significant headwind in the profit and loss account this year" due to the development of exchange rates, as CFO Dominik Asam says. Every percentage point by which the dollar depreciates leads to a loss of around half a percentage point in growth for SAP.
- Wacker Chemie
$WCH (+1,71%) expects the current exchange rate level to continue. The rule of thumb within the Group is that a depreciation of the dollar against the euro of one dollar cent will have an impact of around minus three million euros on earnings before interest, taxes, depreciation and amortization without hedging.
Analysts expect the weak dollar to affect other DAX companies. JP Morgan, for example, has just withdrawn its buy recommendation for Airbus shares $AIR (-1,02%) shares, partly because the exchange rate is putting pressure on profit margins. The aircraft manufacturer mainly produces in the eurozone, while the majority of its revenue is generated in dollars.
The real beneficiaries of the weak dollar are based in the USA. For example, the world's largest healthcare group Johnson & Johnson $JNJ (-0,97%) has just raised its forecast for 2025. The second quarter was stronger than analysts had expected. In international business, however, Group sales grew almost solely due to the positive impact of the dollar.
The current weakness of the dollar as the world's leading currency is not only affecting companies that trade with the USA: All companies, regardless of whether they export to Asia, Oceania, Africa or South America, are affected, as the majority of international payment transactions and trade contracts are still settled in US dollars.
Experts expect the dollar to weaken further.
"In our view, we are only at the beginning of the bear market for the dollar," says Laurent Denize, co-investment manager at Oddo BHF. Many banks are assuming that the 1.20 dollar per euro mark could soon be reached.
There are several reasons for this: the tariff and trade dispute, the associated changeable and unpredictable policy in the US, the high level of new debt and, finally, US President Donald Trump's public criticism of Federal Reserve Chairman Jerome Powell. All of this is undermining confidence in a reliable US policy - and: "All of this is tarnishing the image of the US dollar," says foreign exchange expert Sonja Marten from DZ Bank.
The discussion about a possible de-dollarization has been gaining momentum for months. This refers to the debate about whether the US dollar is losing its nimbus as the world's reserve currency. "For the first time in a long time, we believe this discussion is actually justified," says Marten. In her opinion, investors looking for alternatives to the dollar will inevitably end up in the eurozone.
If this happens, the euro will continue to gain in value as money flows from dollar to euro investments.
The trend towards the euro is likely to be fueled by the fact that the European Central Bank has probably almost reached the end of its cycle of interest rate cuts after eight cuts in the last two years. The financial markets are only pricing in a further small interest rate cut of 0.25 percentage points by the end of next year.
By contrast, market participants in the US are expecting four interest rate cuts totaling one percentage point by the end of 2026, according to data from the financial news service Bloomberg. The interest rate level between the two currency regions is therefore likely to converge.
The result: the previous advantage for investors in the USA of receiving more interest for their investments there would disappear. This would make dollar investments (even) less attractive in future and, in turn, create further potential for the euro - to the chagrin of export-oriented companies from the eurozone with a strong international presence.
Source (excerpt) & chart: Handelsblatt, 25.07.25
