Currency risk arises when the value of a currency changes in relation to another currency. It can impact investors or companies that do business in other countries.
Currency risk can reduce the returns that investors make on foreign stock markets. This is because their return would partly depend upon the relationship of their home currency and the foreign currency.
Even domestic companies can be affected by currency risk. This is because most businesses rely on buying supplies in other countries and the price of those goods depends on the currency exchange.
When it comes to minimizing currency risk, the best companies to invest in are the companies that have a strong global presence. This is because they do business in most currencies and can hedge the risk.
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