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Does anyone manage currency risk?
I have wondered this a lot,
businesses who deal with foreign currencies tend to purchase assets to balance out exchange rate risk by shorting the foreign currency. At least this is my understanding. If a company had assets in a foreign they would short sell the foreign currency so that if the exchange rate of the foreign currency to the domestic one dropped they would stand to lose nothing (but also gain nothing if the exchange rate rose).
So my question is, do any of you do this when traveling abroad?
I'm concerned about how you would go about adjusting for wins and losses. I'd imagine you might want to increase or decrease your short position depending on the situation but making too many trades might become expensive and because of timing it might not always be practical.
Anyways, these are just my initial thoughts.
I would like to hear whether anyone has considered this and how exactly they put this to practice.
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