Glossary entry
Currency risk is the possibility that exchange-rate movements change an investment's value, income, or payment cost when measured in another currency. It can arise from foreign assets, overseas business revenue, or future obligations. A security's trading currency does not fully describe its economic currency exposure, which may depend on where its issuer operates.
Illustrative example
A foreign share rises 5% in its local currency, but that currency weakens against the investor's home currency. The home-currency return may be lower or negative.
What to consider
Currency hedges have costs and may not match the exposure perfectly. A foreign listing can contain several overlapping currency risks.
General information, not a personal recommendation. Product availability, rights, and obligations are determined by the relevant provider, jurisdiction, and approved agreements.