Foreign Exchange and Currency
Last Revised: September 10, 2013
One risk of foreign trade is the uncertainty of future exchange rates. The value of the currencies can change quickly, sometimes between the time a deal is concluded and when payment is received. If an exporter is not properly protected and knowledgeable, a devaluation or depreciation of one of the currencies could cause the exporter to lose money.
Exporters who choose to trade in foreign currencies can minimize foreign exchange exposure by using risk management techniques, such as spot exchange rates, forward hedges, options, etc.