Foreign Currency Effects

Filed Under »
Dictionary Says

Definition of 'Foreign Currency Effects'

The gain or loss on foreign investments due to changes in the relative value of assets denominated in a currency other than the principal currency with which a company normally conducts business. A rising domestic currency means foreign investments will result in lower returns when converted back to the domestic currency. The opposite is true for a declining domestic currency.
Investopedia Says

Investopedia explains 'Foreign Currency Effects'

Foreign investments are complicated by currency fluctuation and conversion between countries. A high-quality investment in another country may prove worthless because of a weak domestic currency. Foreign-denominated debt used to purchase domestic assets has led to bankruptcy in several cases due to a fast decline in a domestic currency or a rapid rise in the currency of the foreign-denominated debt.

Related Definitions

  • Currency

    A generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and ...
    Read More »
  • Exchange Rate

    The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the ...
    Read More »
  • Cambrist

    An individual who is deemed to have above-average knowledge of the foreign exchange market. A cambrist can relate to anyone who deals with currencies and foreign exchange on a regular ...
    Read More »
    • Repatriation

      The process of converting a foreign currency into the currency of one's own country. The amount that the investor will receive depends on the exchange rate between the two currencies ...
      Read More »
    • Currency Risk

      A form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face ...
      Read More »
    • Reporting Currency

      The currency which is used for an entity's financial statements. The reporting currency in financial statements and other financial reports are easiest to understand when they are ...
      Read More »
    • Leads And Lags

      The alteration of normal payment or receipts in a foreign exchange transaction because of an expected change in exchange rates. An expected increase in exchange rates is likely to speed ...
      Read More »
    • Cross Currency

      A pair of currencies traded in forex that does not include the U.S. dollar. One foreign currency is traded for another without having to first exchange the currencies into American dollars.
      Read More »
    • Currency Board

      A monetary authority that makes decisions about the valuation of a nation's currency, specifically whether to peg the exchange rate of the local currency to a foreign currency, an equal ...
      Read More »
    • Export Credit Agency - ECA

      A financial institution or agency that provides trade financing to domestic companies for their international acitivites. Export credit agencies (ECAs) provide financing services such as ...
      Read More »

Articles Of Interest

Partner Links