Currency Risk
Definition
What is Currency Risk?
The possibility that exchange-rate movements will change an investmentAn asset or commitment of money made with the expectation of future income, growth, or both.'s value in the investorA person or organisation that commits capital with the expectation of a financial return.'s home currency.
Example in practice
How This Looks in Practice
A foreign-currency fund gains 5%, but its value in the investor's home currency changes when the exchange rateThe price of one currency in terms of another. moves.
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Related Terms
Market Risk
The possibility of loss because broad market prices or rates move against an investment.
Risk TermsCredit Risk
The possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade.
Risk TermsInterest-Rate Risk
The possibility that changing market interest rates will reduce an investment's value or income appeal.
MiscellaneousBusiness Day
A day on which relevant financial institutions and markets are open for normal processing.