1. Source: Dharmapala, Dhammika, C. Fritz Foley, and Kristin J. Forbes (2009). “Watch what I do, not what I say: The unintended consequences of the Homeland Investment Act”. NBER Working Paper #15023. 2. Source: BofA Merrill Lynch Global Advisors. Responses from BofAML's 20th Risk Management Survey. Percentages do not add up to 100% since respondents can select more than one. 3. Source: Bloomberg query (SRCH ). 4. Non-USD debt is often used to hedge the USD value of retained earnings in foreign subs (i.e. net investment hedging). Thus if cash is repatriated, hedges must be unwound. 5. Source: SVB FX Risk Advisory. 6. Moody’s Investor Service: $1.3trn, US Joint Committee of Taxation: $2.6trn, Goldman Sachs: $3.1trn, etc. 7. According to the 2016 Triennial Central Bank Survey of foreign exchange and OTC derivatives markets published by the Bank of International Settlements. 8. Domestic tax rate on repatriated funds was cut to 5.25%, down from 35%. 9. According to Bureau of Economic Analysis. $300bn estimate is based on a 5x trailing 5-year average repatriation. 10. According to the 2016 Triennial Central Bank Survey of foreign exchange and OTC derivatives markets published by the Bank of International Settlements. 11. One other important reason the USD appreciated in 2005: Fed hiked rates 8 times that year. 12. Moody's report - "US Non-Financial Companies: Cash pile grows 9.2% to $1.84 trillion; tech extends lead over other sectors”.
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Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement of exchange rates. Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from your own tax, financial, legal and other advisors, and only make investment decisions on the basis of your own objectives, experience and resources.
Ivan Oscar Asensio advises global corporations and institutional investment managers on solving problems related to currency risk. He has held similar roles at HSBC, Merrill Lynch & Co., and Bank of America in New York, San Francisco and Los Angeles.
His approach when engaging clients involves the use of quantitative techniques for purposes of risk discovery, risk quantification, and ultimately the development of tailored strategies that are consistent with the institution’s stage in the life cycle, performance objectives, desired accounting presentation, and risk tolerance.
Dr. Asensio received his Ph.D. in economics from the University of California, Santa Cruz. He also holds an M.S. degree in statistics from UCLA, and dual-undergraduate degrees in finance and mathematics from USC.