Printer Friendly| Source of Translation Exposure | Economic Exposure |
| Transaction Exposure |
It is not just
exporting or importing companies that are affected by exchange rate movements.
Companies whose operations are largely or even entirely domestic can also be
affected by changes in exchange rates and are therefore exposed to currency
risk.
Even if companies do
not sell their goods and services in overseas markets, or even buy raw
materials from overseas suppliers, other competing firms are likely to,
potentially subjecting the whole sector to indirect foreign exchange exposures.
Companies
that compete against rivals that have production costs denominated in a
different currency (either by overseas production or imports) could find their
competitiveness in their own market diminished. For example, if the value of
their local currency rises (reducing cost of imports and increasing cost of
exports) against currencies used by competitors.
Currency
risk management requires an understanding of types of foreign exchange
exposure.
Foreign
Exchange (FX) exposure can usually be encountered in three quite different
forms:
- Translation risk
- Economic risk
- Transaction risk
If you are importing or exporting, for expert commercial foreign exchange services, speak to us at Raphael's Bank.
Quick and easy foreign exchange deals via our branch network, treasury centres or over the Internet.
More information.