Currency Risk

Currency risk, also called exchange rate risk, refers to the potential for financial loss resulting from fluctuations in a country's currency value. When a business or investor deals with multiple currencies—such as importing goods from another country or investing in foreign assets—the value of those currencies can change over time. If the currency you are dealing with weakens relative to your home currency, it can reduce profits or increase costs. Conversely, if it strengthens, your investments or expenses may become more valuable. Managing currency risk involves strategies to minimize these uncertain impacts on financial outcomes.