giants2010

Domb, you are correct as per my understanding.

Domestic currency exposure = 1 + Local currency exposure.

Positive or Negative Local currency exposure is determined when the value of asset denominated in its own local currency (which is a foreign currency to the investor though) goes up or down because of its Local currency appreciation or depreciation.

In the above example, Local currency exposure is negtive for sure, but we cannot say anything on Domestic currency exposure to be positive or negative.

It looks like a Schweser Mistake to me.

Damil, domestic currency is the currency of the Investor (will be USD for a US investor). And Local currency is the currency of the foreign asset, where this US investor has invested in.