foreign exchange risk

(redirected from Currency Exchange Risks)

Foreign exchange risk

The risk that a long or short position in a foreign currency might have to be closed out at a loss due to an adverse movement in exchange rates. In general, the risk of an adverse movement in exchange rates.

Foreign Exchange Risk

The risk that the return on an investment may be reduced or eliminated because of a change in the exchange rate of two currencies. For example, if an American has a CD in the United Kingdom worth 1 million British pounds and the exchange rate is 2 USD: 1 GBP, then the American effectively has $2 million in the CD. However, if the exchange rate changes significantly to, say, 1 USD: 1 GBP, then the American only has $1 million in the CD, even though he/she still has 1 million pounds. Foreign exchange risk is also called exchange rate risk.

foreign exchange risk

The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced. For example, if an investor residing in the United States purchases a bond denominated in Japanese yen, a deterioration in the rate at which the yen exchanges for dollars will reduce the investor's rate of return, since he or she must exchange the yen for dollars. Also called exchange rate risk.
References in periodicals archive ?
Actual results could differ materially from the outlook guidance, expectations, and other forward-looking statements as a result of a number of factors, including among others, the dependence on orders from certain customers and the degree of concentration, the uncertainty of customers' implementation of cost reduction projects, the effect of healthcare reform mandates and initiatives, the mix of work and revenue between staffing and solutions, currency exchange risks, and new changes in government regulations and laws that affect the IT industry and the industries in which the Company's clients operate.
It will also allow local borrowers, whose revenue streams are predominately in somoni (the currency of Tajikistan), to take medium-term loans in local currency, thus eliminating currency exchange risks .
MHI has been looking to fortify its global business structure to attract more orders and at the same time evade currency exchange risks.
The end of currency exchange risks and costs helped integrate European markets, boosting trade between member states, a move that helped German small business in particular.
With this three-year senior loan, the EBRD is increasing the availability of medium-term local currency lending to entrepreneurs in Kyrgyz Republic, especially in the country's remote rural areas, and helping them avoid taking on currency exchange risks.
dollar as its legal tender, virtually eliminating any currency exchange risks to foreign companies operating there.
29 per cent which is based on on lower euro money rates but with no currency exchange risks.
It will also allow local borrowers, whose revenue streams are predominately in somoni, to take medium-term loans in local currency, thus eliminating currency exchange risks.
The local currency portion of the loan is provided under the EBRD's new Local Currency Lending Programme in early transition countries (ETC), which aims to support private sector development by ensuring the Kyrgyz borrowers, including local enterprises, banks and microfinance organisations, avoid taking on currency exchange risks.
The move is designed to reduce currency exchange risks and curb the firm's reliance on commercial banks in financing, the sources said.
According to John Rwangombwa, the governor of the National Bank of Rwanda, by borrowing in local currency, businesses were protected from currency exchange risks.
The loan to Converse Bank falls under two important EBRD initiatives: (i) the Armenian Multi-Bank Framework Facility II (MBFF II) which aims to support the sustainable development of the country s banking sector with a special focus on supporting micro, small and medium-sized enterprises and (ii) the Local Currency Lending Programme in Early Transition Countries (ETC LCY), which aims to further private sector development by providing long-term financing and ensuring that Armenian borrowers, including local enterprises, banks and microfinance organisations, avoid taking on currency exchange risks.