The problem of "currency risk" refers to:

Question

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Currency risk refers to the fluctuations in foreign exchange rates, which can affect the value of investments, assets, or transactions denominated in a foreign currency. This risk arises due to changes in geopolitical, economic, or market conditions that influence the supply and demand for currencies, such as interest rates, inflation, political stability, trade balances, or investor sentiment. Currency risk can affect various parties, such as multinational corporations, investors, exporters, importers, tourists, or governments. To manage currency risk, some strategies include hedging, diversification, exposure limits, or currency swaps. Options and futures contracts can also provide ways to mitigate the impact of currency fluctuations on financial positions.

The Problem of "Currency Risk" Refers To