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Why a Strengthened Dollar Is A Cause Of Concern For Apple Inc. (AAPL)?

The strengthening of the dollar continues to be a point of concern for the likes of Apple Inc. (NASDAQ:AAPL) and Cisco Systems, Inc. (NASDAQ:CSCO) which rely heavily on international markets for total sales. The Cupertino-based company has already increased prices of apps in Canada and Europe as well as iPhones in Russia as it looks to safeguard its earnings as the dollar continues to strengthen against major currencies.

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During an interview on Bloomberg, Forrester research analyst, Andrew Bartels, reiterated that an increase in app prices clearly shows a change in strategy of how Apple is targeting returns on the ongoing swings in the currency markets.

The increase in app prices comes on the heels of Apple Inc. (NASDAQ:AAPL) opting to increase the prices of iPhones in Russia as the Ruble continued to plunge against the dollar. Currency swings with regards to the Euro and the Ruble might not be the only concern facing Apple at the moment, according to Bartels

“It probably isn’t going to help their sales but there are other forces that are facing Apple Inc. (NASDAQ:AAPL) in Russia that suggest they have decided rather than worry about sales let’s try and maximize what we can get from those sales. Obviously you’ve got a very hostile Russian government towards western companies, there are other forces that work such as a requirement from Russian government to house operations data in Russia which is being viewed as punitive.[..],” said Mr. Bartels

The analyst also believes that Apple operating as a monopoly in terms of popularity in some of the key markets continues to work to its advantage as it can increase prices without having to worry about returns from sales being affected. Unlike Apple Inc. (NASDAQ:AAPL), Cisco has opted to lower prices of its products in Europe as a result of the currency swings as one of the measures of trying to maintain an advantage over competitors.

Societe Generale senior FX strategist, Sebastien Galy, maintains that while the Dollar continues to strengthen against other majors, companies will need to make key decisions with regards to long term plans and competition.

“You will get a rising dollar, you do have to decide what you are going to do with the plans may be that you have in Switzerland are they too expensive. [..]. If you have the equivalent of a competitor in Europe how do you need to adjust your positions relative to them in terms of your funding?  Have you funded yourself locally in Euros or you are funded in dollars? Maybe it’s the right time to fund yourself in Euros. There are a series of decisions, which are very important and unfortunately taken very late in the game,” said Mr. Galy

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