The proportion of non-US income for pharmas varies quite a lot by company. I don't recall seeing an overall number though - but my wild guess would be about a third. Certainly a lot of pharmas and trickle-type companies over the last few years have had to use a weasel phrase along the lines of "were it not for currency fluctuations we would have done great." If the euro strengthens, this would certainly help the pharma industry some.
Note that the euro is at its high for the year:
Dollar hits year's low against euro
By Christopher Swann
Published: May 1 2002 19:21 | Last Updated: May 1 2002 19:24
The dollar tumbled to its lowest level this year against the euro as traders expressed doubts about the US administration's commitment to a strong dollar.
The concerns were kindled by the testimony of Paul O'Neill, US Treasury secretary, to the Senate Banking Committee.
Although Mr O'Neill was adamant that there was no change to policy, there was disappointment that he did not explicitly reassert the government's long-standing strong dollar policy.
This sent the dollar falling from ¥128.2 to ¥127.2. It also enabled the euro to climb close to a cent to $0.908 - its best level of the year.
Nevertheless, some currency analysts thought the market had overreacted to Mr O'Neill's testimony.
"I think the market heard what it wanted to hear, and was looking for an excuse to sell dollars anyway," said Chris Turner, head of research at the economic consultancy IDEAglobal. "It should have been no great surprise that there was no restatement of the strong dollar policy in front of a forum designed to air the grievances of manufacturers."
One point of interest from Mr O'Neill's testimony was a hint that China might eventually have to change its foreign exchange arrangement.
"It's true that they're running what I would characterise as a semi-soft peg, but I don't think, however much their reserves might be, that they can get away very long with in effect defeating the market or using reserves to do it," he said.
Mr O'Neill once again suggested that the US current account was no problem.
His argument has been that the shortfall is simply the consequence of the insatiable appetite of foreign investors for US assets. The influx of capital has sent the dollar higher, resulting in a current account deficit.
Most economists take a more balanced approach to the current account deficit, acknowledging that strong US demand has pushed the current account higher - a situation that has only been sustainable because of demand for US assets.
But even if one accepts Mr O'Neill's view of the process by which the current account has grown, the shortfall must still be seen as a serious threat.
The problem, said Paul Meggyesi, senior economist at Deutsche Bank, is the asymmetry between how quickly current and capital account flows can adjust.
"Capital inflows can turn on a dime while current account flows take much longer to adjust," Mr Meggyesi said. "This means that investor appetite for US assets could dry up very quickly in response to a change in perception over the US economy whilst the current account was still very large."
Portfolio figures published this week by the US Treasury itself suggest that this may already be happening.
In February overseas investors purchased a net $15bn of US assets. On the surface this does not seem too bad. It was an improvement on January, when the net inflow fell to just $8.9bn.
But it was the second month in a row in which inflows were insufficient to fund the current account deficit - which is around $34bn a month. Last year net portfolio inflows were $43bn a month, around 23 per cent higher than the current account deficit.
Even more worrying for the dollar, argued Mr Meggyesi, is that there was no immediate cause for a slowing of flows into the US.
"The US experienced sharp declines in capital flows over recent years following that collapse of LTCM, the bursting of the US equity bubble and the terrorist attacks on New York," he said. "This time however the motive appears to be a grinding realisation that the economic rebound in the US will be slower than hoped for and that the profit/ investment outlook remains clouded."
Foreign purchases of US equities fell from $8.6bn in January to $2.1bn in February - compared to an average monthly purchase last year of $11.6bn.
Foreign purchases of corporate debt - which funded the lion's share of the current account deficit last year - fell from $15.5bn to $7.3bn over the same period. The only positive was an improvement in the inflows into Treasury bonds.
news.ft.com
Peter |
