Currency Exchange Risk

Currency Exchange Risk

Uncertainty about the rate at which revenues or costs denominated in one currency can be converted into another currency.

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.
References in periodicals archive ?
It will enable Transgaz greater flexibility to avoid currency exchange risk in financing gas infrastructure in the region.
Local currency commitment: With this facility, the travel agent can mitigate the currency exchange risk and reduce their accounting workload by paying in currency of their choice for worldwide hotel bookings.
David Bloom, Global Head of Foreign Exchange Strategy at HSBC, said in the same event that managing currency exchange risk and investment approaches to widely-traded currencies have been radically altered due to recent economic slowdown among industrialised nations.
10 October 2012 -- Pennsylvania, USA-based financial risk management advisory and technology solutions firm Chatham Financial said it has launched ChathamDirect for FX risk management, a cloud-based portfolio of applications designed to give corporations the ability to manage foreign currency exchange risk from strategy through reporting.
Financial risks are two-fold and are focused on leverage and currency exchange risk.
The fixed rates of exchange that existed between foreign currencies were eliminated in the early 70s, resulting in increased foreign currency exchange risk.
The American dollar is the legal currency, eliminating the currency exchange risk, and the nation has one of the lowest interest rates in the region.
We have moved the currency exchange risk from the Mexican government to the financial markets.
Maytag is exposed to foreign currency exchange risk related to its transactions, assets and liabilities denominated in foreign currencies.
Information on foreign currency exchange risk (suggesting more substantive focus on this issue).
dollars to eliminate currency exchange risk for the Wien & Malkin partnership.
One of the main reasons for creating the common currency was to eliminate currency exchange risk for European companies and citizens.