What happens to a US company if foreign currency appreciates?

When a foreign currency appreciates against the US dollar, it means that the value of that currency has increased relative to the dollar. For a US company operating internationally or engaging in exports, this can lead to larger profits when they convert the revenue earned in the foreign currency back to US dollars.

For example, if a US company sells products priced in a foreign currency, when that currency appreciates, the revenue generated from those sales in dollars will be higher upon conversion. This is because the company will receive more dollars for the same amount of foreign currency due to its increased value. Therefore, as the foreign currency strengthens, the effective earnings in terms of US dollars rise, resulting in greater profitability for the company.

This phenomenon directly impacts companies engaged in exporting goods or services, as they benefit from more favorable exchange rates when converting foreign earnings into dollars. Hence, when the foreign currency appreciates, it gives the US company a larger profit.