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Risk & Portfolio

Currency Risk

Also called: FX risk, exchange rate risk, translation risk

Currency risk is the effect of exchange rate moves on the value of a foreign asset or cash flow measured in your own currency. It's often unrewarded: over long horizons currency moves add volatility without adding expected return, which is the argument for hedging bonds and, more contentiously, for leaving equities unhedged since currency and equity moves often partly offset.

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