A company holding a net asset position in a depreciating currency should lead,and a company holding a net asset position in an appreciating currency should lag.

Question

Quizplus · Accepted Answer

This statement is true. When a company holds a net asset position in a depreciating currency, the value of those assets decreases over time. Therefore, they should lead - meaning they should take action to mitigate the impact of currency depreciation on their financial position. On the other hand, a company holding a net asset position in an appreciating currency sees the value of their assets increase over time. Therefore, they can afford to lag - meaning they can delay taking action to mitigate the impact of currency appreciation on their financial position.

A Company Holding a Net Asset Position in a Depreciating