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6. Exchange rate uncertainty may not necessarily mean that firms face exchange risk exposure. Explain why this may be the case. A firm can have

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6. Exchange rate uncertainty may not necessarily mean that firms face exchange risk exposure. Explain why this may be the case. A firm can have a natural hedging position due to, for example, diversified markets, flexible sourcing capabilities, etc. In addition, to the extent that PPP holds, nominal exchange rate changes do not influence firm's competitive positions. Under these circumstances, firms do not need to worry about exchange risk exposure

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