Can a person in America lend money to a person in Australia in order for them to benefit from the exchange rate. I want only my initial amount lended to be returned. Are there any consequences to me for my generosity? Does he report the profit in his country? Thank you.
I think you misunderstand the impact of an exchange rate.
Yes, $1 USD today is worth about $1.3 AUD. If you send $1,000 USD, their bank will convert that to $1,300 AUD (minus some fee of probably 2-5%).
If they repay you, they are still going to need to repay the same amount. If you define the repayment terms as "repay me $1,000 USD", then you will get back exactly the amount you sent. If the AUD has weakened before they repay you, then they will need to use more AUD to pay you that $1,000 USD.
If you define the repayment terms as "repay me $1,300 AUD", then maybe the AUD strengthens and you get back more USD-value, and if the AUD strengthens then you get back less USD value.
There is no 'benefit' to having the exchange rate - it just is what it is. Neither side will get 'extra value' from the exchange rate. Lending between currencies will create risk for either you or them, depending on what currency the repayment terms are set in.