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 ?
"A longstanding member of the chamber, Jaspaul has a fantastic understanding of the Black Country area and its businesses - we urge all our internationally trading members to speak to Jaspaul and see how Rational FX can help reduce their foreign exchange risk."
Kyriba, which first announced its intent to acquire the company in January, said it now offers the most robust solution for managing global foreign exchange risk, enabling finance chiefs to mitigate the impact of currency fluctuations on earnings per share.
Shaikh Esam presented innovative ways for Islamic banks to hedge foreign exchange risk.
The Group helps managing the foreign exchange risk of customers with forward contracts, giving clients the ability to lock in their exchange rate in excess of 5 years if needed.
Its business model is well-tested and allows the company to tightly control credit and interest rate risks, while avoiding foreign exchange risk. SC is only active in the credit card segment, but business concentration risk is somewhat mitigated by diversification of revenue by several types of fee income as well as interest income (13% of total revenue in 2017).
It encourages innovation and technological advancement in the banking sector and aims to boost banks' role in foreign exchange risk management.
The agreements will help Samruk-Energy increase its balance sheet flexibility by reducing foreign exchange risk, enhance its operational efficiency, and identify a renewable energy pipeline for the company.
Regions Capital Markets, a division of Regions Bank, provides products and services including syndicated loan facilities, interest rate, commodity and foreign exchange risk hedging.
World Bank funding will be at concessional rates and provided directly to the government, which takes the foreign exchange risk. The remaining Sh500 million will be provided by shareholders, including leading private sector institutions and the National Treasury through Development Finance Institutions funding.
The Canadian office was established to support demand for international currency payments and collections, foreign exchange risk management and import finance solutions from businesses based in Canada.
The volatility in foreign exchange risk is influenced by change in economic performance of various economies in terms of their GDP, inflation rate, fiscal deficit, employment rate, position in world trade etc.
While foreign exchange risk is a problem to on-grid and off-grid power project developers alike, the nature of the risks can vary slightly between them.

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