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Uncertainty in dollar/franc exchange rate

Suppose that your company has an equity position within the French firm. Explain some of the condition under which the dollar/franc exchange rate uncertainty does not have the exchange exposure for your company.

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Small changes in the exchange rates do not essentially constitute the currency exposure. If French franc value of the equity moves in the opposite direction as much as the dollar value of the franc changes, then dollar value of the equity position will be insensitive to the exchange rate movements. Consequently, your company will not be exposed to the currency risk.

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