U.S. multinational companies use the foreign exchange market for many reasons. One of those reasons is so that they can hedge their payables that are due in a foreign currency. By using foreign currency markets the company can reduce, or eliminate, the chance of great losses due to the fluctuation of the exchange rates.
U.S. multinational companies use the foreign exchange market for many reasons. One of those reasons is to reduce the risk of devaluation of dividend payments as a result of fluctuations of the exchange rate.
U.S. multinational companies use the foreign exchange market for many reasons. One of those reasons is so that they can hedge their receivables that are going to be collected in a foreign currency. By using foreign currency markets the company can reduce, or eliminate, the chance of great losses due to the fluctuation of the exchange rates
Though U.S. multinationals use the foreign currency market for a number of reasons, this is not one. The foreign currency markets will not enable the company to improve the return on the investment of a foreign subsidiary as the foreign currency markets can be used only to protect against losses due to fluctuations of the exchange rate. Assuming that the foreign subsidiary's return on investments would involve cash inflows and outflows in the foreign subsidiary's currency only, those cash flows would not be subject to exchange rate risk.
|
