By REUTERS

Filed at 5:18 p.m. ET

NEW YORK (Reuters) - U.S. multinationals are no longer licking their chops over the prospect for profits due to a weakening dollar as its safe haven status has buoyed the dollar and left U.S. companies licking their wounds instead.

BorgWarner Inc. (BWA.N), a Chicago-based auto components manufacturer, and earth-moving equipment maker Caterpillar Inc. (CAT.N) have said the weak euro has affected earnings.

And computer- and printer-making giant Hewlett-Packard Co. (HWP.N) will probably see its bottom line shaved by currency losses, company spokesman Dave Berman said. Increases in costs at HP operations in Japan and losses from the rising cost of U.S. goods abroad have knocked down the company's earnings.

``The (falling) euro, because it increases the cost of our goods to customers in Europe, will probably have a negative effect on our revenues,'' Berman said.

``In Japan, it's even more of a mixed bag because we have more operations there where we build some of our products, so that increases our costs as well,'' Berman said.

In mid-February, HP said revenues outside of the United States grew 17 percent in the first quarter, but only 8 percent after taking foreign exchange effects into account. The company lost 5 percent of its 7 percent gain in revenue compared with last year's quarter because of the dollar, it said.

Most U.S. companies exposed to the currency market had been counting on a weaker dollar to yield favorable exchange rates, strong export sales and stable profit margins -- especially as demand slowed within the U.S.

The U.S. currency, however, has rallied from sharp lows to three-month highs against the euro and a 22-month peak versus the yen. Reports of a record $115.7 billion U.S. account deficit have hardly put a chink in the dollar's armor.

MANUFACTURING TAKES THE BRUNT

IDEAglobal currency strategist Andrew Delano said companies involved in manufacturing -- like Hewlett-Packard -- are often the most vulnerable to dollar strength.

``Generally when you talk about the effect of the strong dollar, you look toward the manufacturing sector,'' Delano said. Service-sector companies often reap the steepest gains from capital flows into the U.S. economy, Delano said. But manufacturers with greater exposure to currencies and domestic consumer demand can be laden with the costs, he said.

``The conditions in the U.S. that make productivity gains profitable are what drew all of the foreign investment flow into the U.S.,'' Delano said. ``But the resultant dollar strength has ... imparted a cost on the manufacturing sector.''

The dollar has shown surprising resilience in the face of slumping equity markets worldwide and a softening U.S. economy, and has been propped up in recent weeks from talk of save-haven flows into shorter-term assets dominated in dollars and cash.

An expected cut in interest rates on Tuesday by the U.S. Federal Reserve could boost the dollar further, analysts said. And money continues to repatriate out of foreign markets into dollar-denominated assets.

LOSSES WIDESPREAD, BUT EXPECTED

BorgWarner said in early February that the impact of the weak euro lopped 15 cents a share off its fourth-quarter earnings. Caterpillar said in January that gains in sales volume, increased manufacturing efficiency and a favorable tax adjustment were largely offset by the negative impact of the weak euro.

``This is a part of doing business when you're a multinational company and you've got operations globally,'' said Caterpillar spokeswoman Marsha Hausser.

HP shuffles cash from currency to currency to capitalize on exchange rates, as most companies do, Berman said.

``But we always have to leave a certain amount of cash in every country where we do business for operating reasons,'' he said. And those funds automatically create exchange-rate vulnerability.

Peoria, Ill.-based Caterpillar, which exported $5.2 billion of products in 2000, has manufacturing operations spread across the globe and benefits from costs measured in various currencies when it hurts in regard to sales, Hausser said.

``Some key manufacturers started to state that the strength of the dollar was really starting to crimp their competitiveness and come out on their balance sheets'' in the third quarter of 2000, Delano said. ``Those were some of the first signals that the dollar wasn't just a one-way benefit for the U.S.''

Translation - More pressure on the stock market

-- Guy Daley (guydaley@altavista.com), March 20, 2001