Answered

Why should a firm decide to use currency hedging instead of strategic hedging?

A. Firms that fail to hedge are at the mercy of the IMF.
B. Some firms concentrate on currency hedging and refrain from strategic hedging.
C. Currency hedging reduces the impact of unpredictable foreign exchange rates.
D. Engaging in currency hedging increases the profits of a firm.



Answer :

GinnyAnswer

Final answer:

Currency hedging helps firms mitigate risks associated with foreign exchange rate fluctuations.


Explanation:

Currency hedging is chosen by firms to reduce the impact of unpredictable foreign exchange rates. By engaging in currency hedging, a firm can protect itself from potential losses resulting from fluctuations in exchange rates. This strategy allows the firm to secure a certain exchange rate, ensuring stability in the value of future transactions.


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