A U.S. company has a forward sale contract for delivery of euros at the end of May at a price of $1.24/€. The U.S. dollar strengthens against the euro during this period. The company will:

Question

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When the U.S. dollar strengthens against the euro, it means that fewer dollars are needed to buy euros. Therefore, if the company has a contract to sell euros at a fixed rate of $1.24/€, and the market rate falls below this (because the dollar strengthens), the company will gain by selling euros at a higher rate than the current market rate.

A US Company Has a Forward Sale Contract for Delivery of of Euros