How would an exporter who always shifts exchange rate risk to the importer by invoicing in the home currency actually threaten future sales?
What will be an ideal response?
Answer: The risk shifting strategy is poorly informed. Whenever goods are sold across borders of countries that use different currencies, there will be foreign exchange risk that must be born by someone. If your firm invoices only in dollars, you may lose export sales that would go to importers that are not willing to bear the risk. Other competitors of yours may be more flexible and willing to invoice in the local currency. The important point is that the foreign exchange risk is present and must be managed by someone.
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