Here's a riddle I've been trying to figured out. Any thoughts?
Let say a company report its financials in a foreign currency - USD, for example - but are listed on an exchange with a different currency - AUD, say.
It seem that when the aussie drop against the greenback, the stock reporting its functional currency in USD also drop.
At first glance that seem to make sense - for AUD-based investor, the AUD being lower against USD mean the stock price need to drop to make up the difference, i.e. to be cheaper/same valuation as before.
that doesn't make sense, at least to me.
I mean it make sense for the buyer to pay less, but why does the company's become less valuable? If anything, the company's stock ought to be more expensive just to stay at the same valuation before the rate changes.