Introduction Investing in international markets involves encounter with various challenges such as sudden changes in market value. Basically the changes in foreign currency exchange rates affect all international investments. Nature of risks differs based on the kind of investment and the conditions within the market. It is important for individuals to learn about the political, economic and social conditions of foreign markets before investing. This enables better understanding of the factors affecting financial outcomes and stock prices (Krugman and Obstfeld, 2011). Some of the potential risks and gains of pricing goods in United States Dollar when selling in an international market Investors face different potential challenges when operating in the global markets. Most of the challenges are associated with changes in exchange rates. The changes nature of fluctuations experienced with exchange rate impacts return on investment either negatively or positively. International prices of goods are majorly based on US dollar since it is one of the strongest currencies preferred for international trade. Most of the transactions are done in United States dollars then later converted to local currency of the trading country. Significant increase on return on investment is usually experienced in times when foreign currency strengthens against the US dollar; this is since more dollars are realized when converted into foreign currency. In times when foreign currency weakens against the dollar low return on investment is recorded since the conversion results into less dollars. At some point some countries usually impose controls in the foreign currency hence restricting the movement of the specified currency out of the country of origin (Krugman and Obstfeld, 2011). The other risk involves the dramatic changes in market value of foreign markets. Individual investors have experienced loss of money in the process of trying to invest based on U.S. market. This is since timing the U.S. market leaves one with the decision of when to leave or get back based on either fall or rise in prices. The benefits of trading in U.S. dollars provides the opportunity to growth since it assures one of reducing the risk of losing money in case of abrupt change in the strength of the local currency. It also enables the company trading to expose their investments to both domestic and foreign stocks enabling smooth ride in the overall returns (Krugman and Obstfeld, 2011). Explanation on Interest rate Parity theory and how it is used to predict future exchange rates This is a financial theory created based on the fact that the difference between two countries’ interest rates equals to the difference between their forward exchange rates and their spot exchange rates. Forward exchange rate could be referred to as a form of future trading whereby an investor accepts to exchange a currency at specified rate and specified future date. Spot exchange rate on the other hand refers to the present conversion rates utilized by investors while converting their returns into money. The interest rate parity theory infers that buying currency in the capacity of a spot exchange rate, then transferring the investment to foreign country offering different interest rate results into same amount based on conditions of the forward exchange rate (Levich, 2001). Interest rate parity works since its absence leads to presence of small investment opportunities. This is con