Currency risk refers to the possibility of profit or loss as a result of currency fluctuations. Currency risk can affect anyone, from multinational corporations to governments to tourists on vacation abroad.
Currency risk is defined as the uncertainty and change in wealth (losses or profits) caused by fluctuations in the value of various foreign currencies.

Currency risk, also known as exchange rate risk, refers to the potential financial loss or gain that arises from fluctuations in the value of one currency relative to another. This risk is particularly relevant to businesses and investors engaged in international transactions. When conducting cross-border trade or holding investments denominated in foreign currencies, changes in exchange rates can significantly impact the overall financial performance.

Currency risk arises due to various factors, including geopolitical events, economic indicators, and market sentiment. The risk can affect both the income and the value of assets, leading to uncertainties in cash flows and profitability. To manage currency risk, businesses often employ hedging strategies, such as using financial instruments like futures and options. Investors may diversify their portfolios across different currencies or use currency-hedged investment vehicles to mitigate potential losses. Understanding and actively managing currency risk are crucial elements in navigating the complexities of global markets.