It never seems to fail. After a prolonged and deliberate currency rate adjustment, major corporations announce reduced sales or profits due to adverse currency movements. Just one recent example: Siemens AG, Germany's largest electronics company, attributed a 5% decline in Q4 2003 sales to the U.S. dollar's weakness against the euro. That amounts to roughly a billion euros in lost revenues in just three months. U.S.-based exporters experience the flip-side of the weak dollar coin, earning more in dollar-terms on sales made abroad. In the past, mainly only importers and exporters had to worry about the effects of exchange rate shifts on their bottom lines. Today, though, traders are increasingly diversifying investments outside their base currency. International asset diversification can reduce portfolio risk and enhance return, but foreign asset returns can change drastically based on exchange rate shifts.
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