In which scenario would a company choose to buy puts on a currency?

The scenario in which a company would choose to buy puts on a currency is when it expects that currency to depreciate. Buying a put option gives the company the right to sell a currency at a predetermined price within a specific period. If the currency does indeed depreciate, the company can exercise its put option at the higher strike price, benefiting from the difference between the strike price and the market value of the currency. This strategy helps the company mitigate the risk of loss due to unfavorable currency movements.

In contrast, when a company expects a currency to appreciate, it may not find it beneficial to purchase put options since the value of its position might increase, and there would be no need for protection against depreciation. Hedging against price volatility is indeed a valid strategic choice, but the specific action of buying puts is related directly to expectations of depreciation. Likewise, having a short position in the currency wouldn't necessitate purchasing puts, as the company would be benefiting from a decline in currency value already.