Microsoft has lowered its forecasts for the current quarter, blaming inflation, economic policies, and the surging US dollar for its muted outlook.

The tech giant revised its expected earnings to US$2.24 per share from previous guidance of US$2.28.

Currency fluctuations will deliver a A$633 million hit on June quarter revenue, which will now be in the ballpark of A$71.46 billion. The company makes roughly half its revenue from overseas.

Microsoft shares dropped 1.8 per cent in mid-morning trading, but have since rebounded 0.79 per cent.

Microsoft updated its outlook “to help investors understand the impact of unfavorable foreign exchange rate movement in the fourth quarter of fiscal 2022 since the forward-looking guidance provided on April 26″.

In April, CFO Amy Hood signalled foreign exchange rates would “decrease total company revenue growth by approximately 2 points”.