foreign exchange risk

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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 ?
These statements involve risks and uncertainties that include recruiting and activity of the Company's independent sales forces, the success of new product introductions and promotional programs, governmental approvals of materials for use in food containers and beauty and personal care products, the success of buyers in obtaining financing or attracting tenants for commercial and residential developments, the effects of economic and political conditions generally and foreign exchange risk in particular and other risks detailed in the Company's periodic reports as filed in accordance with the Securities Exchange Act of 1934.
As part of its overall conservative risk management strategy and appetite, the bank has a policy of hedging foreign exchange risk.
In tandem, banks have increased their indirect foreign exchange risk through foreign currency lending to non-financial corporations.
She spoked at a seminar on Managing Foreign Exchange Risk conducted by Almus Risk Consulting in association with the National Stock Exchange in Mumbai.
Global Banking News-June 12, 2014--Wells Fargo International names head of Foreign Exchange Risk Management Group
With the new plant we will not only increase competitiveness but we will also considerably reduce foreign exchange risk for the group," LEM CEO Francois Gabella has commented.
exporters to build the foreign exchange risk into their pricing to account for the potential of adverse exchange rate moves and the incremental costs of the exchange process itself.
Businesses trading in foreign currencies always need to be mindful of foreign exchange risk.
Speak also with your bank about managing your foreign exchange risk and to understand how Letters of Credit can help you manage debtor recovery risk.
For many years leading up to this big bang, more than a few companies had become complacent with their foreign exchange risk management practices.
In addition to basics of risk management, he covers techniques of hedging, the role of information systems in exposure management, and presents select case studies of foreign exchange risk exposure management.
Foreign exchange risk is not that simple to assess and may lead to more surprises in un-hedged risk than not.

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