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International Trade vocabulary · Foreign Exchange

Currency risk

Meaning in international trade, with examples

nounCommon term

In international trade, currency risk means: The risk that a change in exchange rates will reduce the value of money you will receive, or raise the cost of money you will pay, in another currency.

In Turkish: kur riski, döviz kuru riski

How it is used

Also called exchange rate risk or FX risk. It arises whenever sales or purchases are priced in one currency and costs are in another, and it lasts from the order until payment. Companies manage it through the choice of invoicing currency, natural hedging or forward contracts.

Example sentences

  1. Because our costs are in lira and our sales in euros, currency risk is a major issue for us.

  2. If we invoice in the customer's currency, we carry the currency risk; if we invoice in ours, they do.

Common collocations

  • manage currency risk
  • exposure to currency risk
  • reduce currency risk
  • currency risk management
  • exchange rateThe price of one currency expressed in another, for example how many Turkish lira you need to buy one euro.
  • hedgeTo reduce the risk of losing money from future price or exchange-rate changes, for example by fixing today the rate for a payment that will arrive later.
  • forward contractAn agreement with a bank to buy or sell a set amount of foreign currency on a future date at an exchange rate fixed today.
  • foreign currencyMoney in the currency of another country, such as US dollars or euros for a company based in Turkey.

More terms: Foreign Exchange

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