Strong dollar vexes mid-sized U.S. exporters, local demand helps

First thing every morning Bill Hickey turns on the TV to see where the U.S. dollar is trading in the hope it has lost value against the euro and other currencies.

"And there it is, staring you right in the face," says Hickey, president of Chicago-based steel company Lapham-Hickey Steel, about the dollar's continued strength. "The strong dollar is going to be bad for us and it’s going to be bad for the U.S. industrial economy."

Mid-sized U.S. manufacturers, such as Lapham-Hickey, are likely to bear the brunt of the dollar's climb that has lifted it nearly 10 percent against the euro and 7 percent against major currencies since mid-December.

Foreign exchange strategists polled by Reuters shortly after the euro hit an 11-year low of $1.11 on Jan 26 cited a nearly one-in-three chance the euro would hit parity or lower in the coming year.

Multinational giants with operations around the world are less vulnerable because they have costs in local currencies that act as de-facto currency hedges.

But small and medium-sized U.S. firms, which account for about a third of U.S. exports, worry that the strong dollar will make their goods more expensive in foreign markets and less competitive at home.

While most major currencies, including the yen and the pound, have been weakening against the dollar over the past months, the euro tumbled the most in recent weeks, a boon for manufacturers in Germany and beyond.

Hickey has not yet laid off any of the 600 workers at the company's six plants, five around the Midwest and one in Connecticut, and is seeking new customers to offset lost business.

But he worries about the dollar's impact on key clients, such as Caterpillar Inc, Deere & Co or major automakers.

Caterpillar CEO Doug Oberhelman voiced his concern in a Jan. 27 call with analysts, saying Japanese, UK or German rivals had "quite an advantage over their American competitors."


Some say the real pain has yet to come given that particularly the euro's sharp losses have been a relatively recent phenomenon. Others point out that tumbling oil and commodity prices have made it harder to discern the currency effect.

Indiana Manufacturers Association president Patrick Kiely said the dollar was just one agenda item at a recent board meeting. "There are so many moving parts, it's really too early to tell."

Drew Greenblatt, president of Baltimore-based Marlin Steel, which makes custom metal forms from baskets to hooks, says weak eurozone demand so far is a bigger concern for his business than the strong dollar.