The weak U.S. dollar may help American multinational companies meet profit expectations in the quarters ahead, but the first sign of a reversal could eat away profits at a time when every cent counts.

Companies based outside the United States, of course, face the opposite situation: praying for the greenback to strengthen after more than two uninterrupted years of declining.

This week, Finland's Nokia (NOK1V.HE: Quote, Profile, Research) disappointed investors who sent shares of the world's largest mobile phone maker down 13 percent on Wednesday after the company said its market share in Europe would shrink because of the falling dollar.

The flip side was Coca-Cola Co (KO.N: Quote, Profile, Research). The company received an 11 percent, or $206 million, boost to operating income just from currency movements during the first three months of the year.

A strong showing from Caterpillar Inc (CAT.N: Quote, Profile, Research), IBM (IBM.N: Quote, Profile, Research) and other companies that generate a large part of their profits overseas have helped investors get over persistent fears about the impact of a devastating credit crisis on business and consumer spending.

But after the euro climbed 8 percent in the first quarter to record highs against the dollar, the risk has increased that the U.S. currency could bottom out and possibly even strengthen later this year -- turning the tables on companies in the United States and Europe.

You put into motion the exact reverse situation that has been boosting those corporate profits, said Keith Hembre, chief economist at First American Funds in Minneapolis.

It's a pretty heavy discount rate on earnings achieved through currency market movements. I wouldn't place a lot value on them just because currencies are inherently volatile, he said.

Indeed, adverse currency movements sliced 8 cents a share off of Alcoa Inc's (AA.N: Quote, Profile, Research) first-quarter earnings. If not, the company would have actually exceeded Wall Street expectations.

Currency volatility aside, the long-term trend for U.S. companies has been increased profits from overseas businesses.

Last year, when the trade-weighted dollar tumbled 6.8 percent to the weakest in 12 years, U.S. corporate profits derived from exports and facilities owned abroad surged 43 percent to $396.8 billion, according to U.S. government data.

Now, many analysts expect the dollar to stabilize this year and even to rise against the euro, as the Federal Reserve winds down its interest rate-cutting spree and the European Central Bank possibly starts one of its own.

That is making corporate treasurers think twice about using the same old hedges they have used for the last two years that the dollar has dropped.

If a company is going through a budgeting process when the euro or yen or Canadian dollar is at a lofty level and they have foreign operations, they are going to be concerned about a rebound in the U.S. dollar, said Mark Frey, head trader with Custom House, a currency services firm in Victoria, British Columbia.

In late February, when the Canadian dollar jumped to new highs for the year against the U.S. dollar, some of Frey's corporate clients whom he had not spoken with in years called him with significant hedging requirements.

Meanwhile, companies whose costs are mainly in the United States and whose lines of revenue come from abroad are enjoying the foreign exchange benefits.

Without the 7 percentage-point help to revenue from currency gains, International Business Machines would not have met analysts' forecasts. The company's better-than-expected earnings report was one of the reasons behind the rally in U.S. stocks this week.

Many stock watchers realize that this kind of boost will not always be around. However, they cringe at the thought of sharp increases in currency volatility.

I would not want to see the dollar soar. I'd like to see the dollar steadily start rising, said Al Goldman, chief market strategist with Wachovia Securities in St. Louis.

When you have surgery, you don't jump off the table. You crawl, then walk and then run.

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