Much of the U. S. government debt is held as Treasury bonds and bills by foreign investors. How do fluctuations in the dollar exchange rate affect the value of that debt held by foreigners?

Question

Business

Jorge Carr

23 May, 11:00

Much of the U. S. government debt is held as Treasury bonds and bills by foreign investors. How do fluctuations in the dollar exchange rate affect the value of that debt held by foreigners?

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Answers (1)

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Reese Wong · Answer 1

As the dollar becomes stronger relative to a foreign currency for a given face value of bond holdings it will yield more home currency to the foreigners so that the assets will be worth more to the foreign investors

Explanation:

The value of the debt increases as the dollar value fluctuates because the debt that is held by the foreigners by changing the value of the money debtors will be repaid by the government

The bonds that are paid off in dollars will be of the lesser value and hence there will be a decrease in the value of the dollars and in the value of what they owe