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And 80percentt of Icelandic homes have mortgages with payments either directly linked to inflation or denominated in foreign currencies.
A bank loan taken out at a floating interest rate, or denominated in foreign currency, exposes the borrower to additional risks beyond his control.
A sliding currency makes it more difficult for Brazil to make payments on its more than $250 billion in debt, much of which is owed to American financial institutions or denominated in United States dollars.
For example, if the U.S. dollar declines, have some investments in precious metals or denominated in other currencies, such as Switzerland or Australia or Singapore ETFs.
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"People sell dollars and buy assets priced in dollars," explains Keith R. McCullough of Research Edge LLC, a New Haven, Conn., market service, referring to assets like foreign currencies or securities denominated in foreign currencies, gold, oil or even real estate or whole companies.
The Canadian dollars raised up north can be used to buy assets or businesses denominated in greenbacks.
The most vulnerable companies are those that mostly sell domestically in their local currency but have debts or costs denominated heavily in dollars.
As a general business practice, most banks do not restrict themselves to lending but acquire and hold other assets, such as government and corporate securities and foreign exchange (that is, cash or securities denominated in foreign currency units).
Similarly, bonds can default or be denominated in an unsound currency.
Some of those outflows reflect wealthy individuals attempting to convert their money into dollar or euro denominated assets such as real estate and investments abroad.
Multinational corporations and financial institutions often use the forward market to hedge future payables or receivables denominated in a foreign currency against foreign exchange risk by using a forward contract to lock in a forward exchange rate.
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