Currency risk
The risk that currency movements raise or lower an investment’s value when converted into your currency.
Definition
The risk that currency movements raise or lower an investment’s value when converted into your currency.
Why this concept matters
It explains why a foreign asset may perform differently from its local market.
What to watch
Currency hedging has a cost and may not remove every fluctuation.
Simple example
A stronger dollar can raise the euro value of a US asset, and vice versa.
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