In the last four years, the U.S. dollar has declined more than 30 percent against major trade currencies. While exchange rates are unpredictable, this trend could continue against a broad spectrum of currencies, from the Chinese renminbi to other Asian currencies. Given substantial off-shoring and outsourcing, many companies have revenues denominated in U.S. dollars and costs denominated in other currencies. Thus any long-term decline of the U.S. dollar poses a significant risk to profits, competitive positions, cash flows and ultimately share value.
This report examines the risk exposures of large and long-term shifts in currency values to future business cash flow, especially changes to the U.S. dollar vs. Asian currencies. The report identifies operational hedging as a means for companies to create flexibility in their operating models. In contrast to financial hedging, operational hedging provides companies a broader range of options to manage long-term exchange rate risks and sustain future cash flows. Learn more from the PDF attachment below.
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