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Foreign exchange risk

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What is meant by foreign exchange risk? What specific problems does foreign exchange present in an organization? How may an organization that needs euros in 6 months protect itself from currency fluctuations?

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Foreign exchange risk refers to the risk that comes to play when one buys items or makes an investment in a foreign country. Due to currency fluctuations, the investor is likely to lose money. For example, when one buys items overseas with American dollars, the dollar is converted to the foreign currency because the price of one country's currency in terms of another is different. This difference in value between currencies is called ...

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