exchange rate risk

Exchange rate risk

Also called currency risk; the risk that an investment's value will change because of currency exchange rates.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

exchange rate risk

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
However firms are commonly exposed indirectly to exchange rate risk. For example, small companies that have no international business should be concerned about exchange rate risk because the pricing by their competitors may be influenced.
The funds invested in foreign currency denominated securities and utilized forward foreign currency exchange contracts to hedge the potential exchange rate risk associated with such investments.
Directors recommended additional steps to curb growth in wholesale foreign exchange funding and to reduce incentives for the nonCaefinancial corporate sector to take on exchange rate risk. They commended the significant progress made in enhancing Turkey's AML/CFT framework.
"While the debt offering could modestly increase its total outstanding debt in the near term, it will help PLDT term out its debt maturity profile and reduce foreign exchange rate risk," Moody's assistant vice president Yoshio Takahashi said.
The Global Trade Services (GTS) team at Bank Muscat blends traditional financial solutions with tailor-made packages for operations, ensuring prompt payments, managing liquidity and minimising exchange rate risk. To meet the challenging demands of exporters, importers and local traders, Bank Muscat offers customised solutions with its strong global network.
The European Commission authorised, on 8 March, a state guarantee scheme put in place by France to cover the exchange rate risk for aeronautic suppliers (AERO 2008), managed by COFACE.
oThe daily high demonstrates the increased demand among our global members and their commercial and investor clients to manage their exchange rate risk or gain exposure to the Indian rupee,o said Eric Hasham, DGCX Chief Executive Officer.
Such detailed data allows a greater emphasis on the actual exchange rate risk firms are undertaking when they trade, as well as permitting analysis of differences in behaviour across firms and products.
Those investing in Turkey thus face a substantial exchange rate risk. However, for short run decisions, of three months or less, the ability to forecast future exchange rates can mitigate this risk.
She said Airbus's cost base totalled 20bn euros, or 15bn excluding engines, but the firm was covered for exchange rate risk until 2 005.The dollar has weakened from around 89 cents to the euro at the beginning of 2 002 to $1.08 to the euro now.