# currency risk

*Last updated: 2026-06-26*

> Currency risk is the exposure to financial loss that arises when exchange rate movements reduce the value of a payment or receivable in the home currency.

Currency risk is the exposure to financial loss that arises when exchange rate movements reduce the value of a payment or receivable in the home currency. In international trade and freight forwarding, it emerges wherever purchase prices, freight rates, or customs duties are agreed in a foreign currency: if that currency strengthens between contract signing and the payment date, actual costs rise with no corresponding benefit received. The exposure is most pronounced on long payment terms, in transactions involving emerging-market currencies, or when buying and selling prices are denominated in different currencies. Companies manage this risk through forward exchange contracts, currency options, or by agreeing contractually to invoice in stable major currencies such as USD or EUR. This differs from convertibility risk, which is the danger of being unable to exchange a currency at all within a given country.

**Source:** [https://www.investopedia.com/terms/f/foreignexchangerisk.asp](https://www.investopedia.com/terms/f/foreignexchangerisk.asp)

## Quick Facts

| Property | Value |
|---|---|
| Term | currency risk |
| Language | EN |
| Word count | 139 |
| Last updated | 2026-06-26 |
| Source | https://www.investopedia.com/terms/f/foreignexchangerisk.asp |

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