Currency exposure

Currency exposure refers to the risk that the value of your investments or business transactions will change due to fluctuations in foreign currency exchange rates. For example, if a U.S.-based company sells products in Europe, a weakening euro relative to the dollar could reduce the company's profits when converted back to USD. Conversely, a strong foreign currency can increase costs or reduce revenues when converted. Managing currency exposure involves strategies to protect against adverse currency movements, ensuring that exchange rate fluctuations do not negatively impact financial performance.