Foreign Exchange Risk We operate on an international basis and therefore, foreign exchange risk exposures arise from transactions denominated  in a foreign currency. Our foreign exchange risk arises primarily with respect to the U.S. dollar and to a lesser extent, the  Chilean peso. Our cash flows from Canadian and Chilean operations are exposed to foreign exchange risk as commodity  sales are denominated in U.S. dollars, and the majority of operating expenses are denominated in local currencies. We hedge a portion of our U.S. dollar denominated future cash flows on a quarterly basis with U.S. dollar forward sales  contracts. We have elected not to actively manage other foreign exchange exposures at this time. We also have various investments in U.S. dollar foreign operations, whose net assets are exposed to foreign currency  translation risk. This currency exposure is managed in part through our U.S. dollar denominated debt as a hedge  against net investments in foreign operations. As at December 31, 2012, $7.2 billion of U.S. dollar debt was designated  in this manner. U.S. dollar financial instruments subject to foreign exchange risk are as follows: As at December 31, 2012, with other variables unchanged, a $0.10 strengthening (weakening) of the Canadian dollar  against the U.S. dollar would have a $71 million effect (2011 – $7 million) on profit before tax resulting from our financial  instruments. There would also be a $30 million (2011 – $19 million) decrease (increase) in other comprehensive income  from our U.S. dollar forward sales contracts designated as cash flow hedges. Our interest rate risk mainly arises from our cash and cash equivalents. Our interest rate management policy is generally to  borrow at fixed rates. However, floating rate funding may be used to fund short-term operating cash flow requirements  or, in conjunction with fixed to floating interest rate swaps, be used to offset interest rate risk from our cash. The fair  value of fixed-rate debt fluctuates with changes in market interest rates, but unless we make a prepayment, the cash flows,  denominated in U.S. dollars, do not. We separately valued the prepayment options on our 2016 and 2019 notes prior to their redemption in 2012 (discussed  in Note 26(c) below). The value of these options fluctuated with both market interest rates and our credit spread. Cash and cash equivalents have short terms to maturity and receive interest based on market interest rates. As at December 31, 2012, with other variables unchanged, a 1% change in the LIBOR rate would have a minimal effect  (2011 – $2 million) on profit. There would be no effect on other comprehensive income. Interest Rate Risk Generations 125 (US$ in millions) 2012 2011 Cash  $ 17 $ 792 Accounts receivable 547 588 Accounts payable (305) (269) U.S. dollar forward sales contracts  (552) (185) Long-term debt, net of discounts and prepayment rights (7,162) (6,605) Net investment in self-sustaining foreign operations 8,959 8,450 Net U.S. dollar assets (liabilities) exposed $ 1,504 $ 2,771