What can foreign (European) companies do to hedge themselves against foreign currency fluctuation?
All companies with currency risk can manage that risk by selling forward their anticipated receipts in one currency in exchange for the currency of that company’s preference. The forward exchange rate is based on the current exchange rate. So a european company that anticipates receiving $1million in a year but is concerned that the dollar will depreciate versus the Euro, will sell $1 million dollars versus Euros, for settlement in a year.
