Trading foreign currencies isn’t for the feint of heart. Positions are highly leveraged and volatility can be staggering. This would seem to be at odds with Warren Buffett’s investment philosophy of keeping it simple and holding forever. That’s why it might seem strange that Warren Buffett just said he’s long the Euro.

At the annual Berkshire Hathaway meeting, Buffett explained his company’s exposure to the currency, saying, “If the Euro goes up, we have additional interest expense…if it goes down we have less.”

Berkshire Hathaway owns Euros because it does a lot of business in Europe. It receives the currency as payments for its operations there. It also hedges its exposure in the foreign exchange and derivatives markets.

The "interest expense" he's referring to is the commission paid to the broker-dealer that handles the transaction. That might be Goldman Sachs, JPMorgan Chase, or any number of large Wall Street brokers.

Buffett is famous—among many other things—for making a $5 billion investment in Goldman Sachs during the financial crisis. It was prescient because the government bailed out the banking sector just weeks afterwards. Buffett eventually profited $2 billion on the transaction.

The Oracle of Omaha is famous for calling derivatives "weapons of mass financial destruction." But the fact is: they're essential to any large corporation in its day-to-day operations. Buffett was criticizing the purely speculative bonds and derivatives that were instrumental in causing the financial crisis.

Global corporations risk losing money by holding foreign currencies, so they buy protection to minimize losses when there are large fluctuations. Consider it insurance. After all, that's Buffett's primary business.

Watch Yahoo Finance's exclusive live stream of the Berkshire Hathaway annual meeting starting at 10 A.M. on April 30th at https://www.perfectloveletters.com/brklivestream