Dealing with foreign private money, currency inflation/deflation.

[Sam B.]

Anyone out there with experience using foreign private money, for example AUD, and how you handled the risk of currency fluctuation?

I can't see anyway around this risk.  Either I take it on or the lender does.

In short term deals I've performed with an AUD lender, I accepted the risk of currency fluctuation and it was written into the lending contract that they were to receive their base AUD amount plus interest as agreed, regardless of any currency fluctuation.  If there was a discrepancy, the borrower was fully responsible for making up (paying) the difference to make the lender whole + his agreed upon interest.

As it was a very short term deal, great interest rate and relatively small sum of funds, it was an acceptable risk for me.  By the time the funds were returned, I actually saved a bit of money as the USD had appreciated.

But structuring a longer term deal (12-36mo+) with a larger sum of money is where I can't find away around it...short of using options to hedge currency risk or something much more involved/costly.

Any input?