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Foreign exchange risk is the level of uncertainty that a company must manage for changes in foreign exchange rates, that will adversely affect the money the company receives for goods and services over a period of time.

For example, a company sells goods to a foreign company. They ship the goods today, but will not receive payment for several days, weeks or months. During this grace period, the exchange rates fluctuate. At the time of settlement, when the foreign company pays the domestic company for the goods, the rates may have traveled to a level that is less than what the company contemplated. As a result, the company may suffer a loss or the profits may erode.

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โˆ™ 2014-11-07 12:28:59
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Q: What is the significance of foreign exchange rate risk and how can this risk be mitigated?
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Related questions

What is the significance of foreign exchange rate risk and how can it be mitigated?

Foreign exchange rate means that 1 usd = 10 pesos. When you exchange currency, understand that it fluctuates, sometimes higher and sometimes lower. Do your trading when it's higher b\c you get more of their dollars for your. All you can do it watch the exchange rates.


Which foreign exchange system has the highest foreign exchange rate?

The Zimbabwean has the highest foreign exchange rate.


What determines the equilibrium foreign exchange rate?

The demand for and supply of foreign-exchange determine the equilibrium foreign exchange rate.


What are some ways that foreign exchange rate risks can be mitigated?

The idea is to use the uneven exchange rate amounts between currencies. You will have to tre say from dollars to euros to yen and maybe one or two more, but you should end up on the pulse side.


Importance of foreign exchange rate?

The foreign exchange rate helps determine the value of money. When the exchange rate is high, then the currency is less valuable.


What statement describes the foreign exchange rate?

The foreign exchange rate is also known as the exchange rate. This is defined as the difference between two currencies.


What is the foreign exchange rate in the US?

The US foreign exchange rate varies greatly depending on the country and currency. The current foreign exchange rate for euros is 0.77 euros per USD. The current foreign exchange rate for CAD is 1.02 CAD per USD.


What is REER in exchange rate?

The real effective exchange rate based on real exchange instead of nominal exchange rate in foreign currency exchange.


Difference between Spot Exchange Rate and Exchange rate?

An exchange rate, which is also called the foreign-foreign exchange rate, is the rate that currency will be exchanged for another currency and may have a forward contract. The spot exchange rate is the current exchange rate today with immediate delivery and it is also called benchmark rates and outright rates.


What are foreign exchange and the exchange rate?

Foreign exchange refer to the act of exchanging one country's currency by a different country's currency. The foreign exchange rate represents the price of one currency in relation to another currency.


What is Two way exchange quotes?

The buying rate & selling rate in foreign exchange market.


What is the difference between a floating and a pegged exchange rate?

pegged exchange rate is officially fixed in terms of gold or any other currency in foreign exchange. Floating exchange rate is flexible rate in which value of currency is allowed to adjust freely determined by the supply & demand of foreign exchange


What is forward rate in foreign exchange market?

Transaction in future date by forward contract(future delivery) to purchase/sell foreign exchange at prevailing rate.


What is the current foreign exchange rate for currencies?

You can update the foreign exchange rate of currencies in the Internet or on forex brokers, such as alpari.com/#informer=quotes or any other ones.


What is the difference between fixed exchange-rate system and flexible exchange-rate system?

A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies Floating or Felxiable Exchange rate is determined by the supply and demand for currency and it self adjusting free tansaction.


What is the significance of foreign exchange rate?

Do you mean The system used?,,,,,,,,, It is very important, That's how any country assesses its own and other countries value and worth financially.


How much will you get for foreign money?

Depends on the current foreign exchange rate. Ask your bank.


How does exchange rate affect businesses?

The exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other.


How does foreign exchange market work?

In any market there are buyers and sellers who negotiate and agree on the price of the commodity being exchanged. The foreign exchange (Forex) market works in exactly the same manner. However, in Forex the commodity being traded is foreign exchange and the price is the variable or fixed foreign exchange rate. Specifically, a foreign currency is being traded for the Base Currency at a particular rate of exchange.


What is the strength of the dollar against foreign currencies?

exchange rate


What are the Factors affecting foreign exchange rate?

chuck Norris


What is the current foreign rate exchange on Canadian money?

The current foreign rate exchange on Canadian money is 1.0 Canadian Dollars is equal to 1.01 U.S. Dollars at this time. The rate changes slightly every day.


Is foreign exchange gain taxable?

Foreign exchange gains are taxable but they are taxable with different rate of tax then actual normal profit of business.


How does a person qualify for forex exchange rate?

Forex Exchange rate is the rate of exchange for currencies that are Foreign to us or from different countries. You may want to check out a Bank Website. www.td.com www.royalbank.com


How are prices established in the foreign exchange market?

The rates are quoted in two ways: A direct exchange rate (or direct quote) is the price of the foreign currency in terms of the home currency; and Indirect exchange rate (or indirect quote) is the price of the home currency in terms of the foreign currency.