A U.S. firm could issue bonds denominated in euros and partially hedge against exchange rate risk by:

Question

Quizplus · Accepted Answer

Invoicing exports in euros would provide a natural hedge against exchange rate risk, as the firm would be receiving payments in the same currency as the bonds they issued. Invoicing exports in U.S. dollars or requesting imports be invoiced in U.S. dollars would not provide the same level of hedging. Requesting imports be invoiced in the currency of the bonds would not be practical, as it would limit the firm's ability to source the best deals on imports from a variety of countries.

A US Firm Could Issue Bonds Denominated in Euros and Partially