Foreign Currency Effects
The gain or loss on foreign investments due to changes in the relative value of assets denominated in a currency other than the principal currency with which a company normally conducts business. A rising domestic currency means foreign investments will result in lower returns when converted back to the domestic currency. The opposite is true for a declining domestic currency. Investopedia Says:
Foreign investments are complicated by currency fluctuation and conversion between countries. A high quality investment in another country may prove worthless because of a weak currency. Foreign-denominated debt used to purchase domestic assets has led to bankruptcy in several cases due to a fast decline in a domestic currency or a rapid rise in the currency of the foreign-denominated debt. Related Terms:
Cross Currency
Currency
Currency Risk
Exchange Rate
Foreign
Leads And Lags
Repatriation
Tequila Effect |