International Business: The New Realities, 5th Edition

Exchange-Rate Forecasting

Losses due to exchange-rate risk are common in international business. Colgate-Palmolive is a U.S. company that makes toothpaste, soap, and other consumer products and generates more than 80 percent of its sales in foreign markets. The dollar’s appreciation against the Brazilian real, the euro, and other world currencies in 2016 hurt Colgate-Palmolive’s sales. Procter & Gamble, Apple, Honeywell, and other U.S. multinationals experienced similar declines in international sales due to the stronger dollar. Such firms raise prices in global markets to offset losses caused by the dollar’s rise. However, higher prices reduce the attractiveness of U.S. products to consumers outside the United States. Many U.S. firms have relocated ...