What it is
Foreign exchange risk is the possibility that the exchange rate of one currency to a different currency might change and then affect the value of your investment.
This type of risk is specific to investments that involve a lot of foreign currency, and those that use it exclusively.
What it means for you
Foreign exchange risk is something that you’ll only face if you use another currency for investing. Examples of investments that bear this risk are Unit Investment Trust Funds (UITFs) that own a lot of assets such as stocks and bonds from other countries, and retail dollar bonds.
Staying updated with the exchange rates is a good way to deal with this risk, because this gives you a general idea of the way that things are moving so you can plan your next move.
