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Currency Hedging

Global Financing and Exchange Rate Mechanisms Paper 2

As more businesses become global the need for understanding foreign exchange and implementing hedging strategies could prove to be the one tool that may result in an increase or loss of investment. United States equity investors, international investing, or allocating assets to overseas stocks, is considered by most investment professionals as a legitimate way to strive for either higher returns or to lessen systematic risk in a diversified portfolio. It adds an asset class that is not perfectly correlated with U.S. equities (and if stock selection is effective) can provide excess returns. Returns on overseas investments include two elements: the stocks return in the local market and the impact on return when the local currency value gets translated back into dollars.
Over much of the post-war era, the U.S. Dollar was the primary reserve currency. This, however, is no longer the case. The U.S. Dollar itself can be the......


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Approximate Word Count: 904
Approximate Pages: 4 (250 words per double-spaced page)

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