... or a host country. Aliber pointed out that countries with strong currencies could borrow at lower cost thereby enabling them to engage in risky investments in weak-currency areas. In other words, countries whose currencies command a premium have an advantage in investing abroad. Studies by Agarwal (1980) with regard to FDI in the US, UK, Germany, France and Canada yielded results that were consistent with the currency premium theory. Graham and Krugman (1995) also recorded that substantial increases of foreign acquisitions in the US coincided with the depreciation of the US dollar. Buckley and Casson (1976) provided a useful summary of the mechanics underlying Aliber's explanation regarding the role of exchange rates in the export of equity capital from the home country. "Investments in other currency areas are often overlooked. The investors take no account of the exchange risks involved in the repatriation of profits to the parent firm. Thus ...

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