Provide a hedge against future exchange rates

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Despite the fact that the Korean won has lost 28% of its value versus the US dollar, Hyundai, and KIA made the correct decision by investing in the US. Their investment provides a hedge against future exchange rates for the firms. Furthermore, the United States had a recession from 2007 to 2009. During the recession, automakers were able to improve sales by using their low-cost approach. Lower pricing for automakers means lower profit margins, but it also means more sales. While earnings continued to decline, sales climbed steadily.

How did the investment provide a hedge against future exchange rates? Elaborate your answers.

Reference no: EM133088399

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