Exchange Rate Risk
The chance that currency movements change the value of money or investments held in a foreign currency.
Exchange rate risk arises whenever your money, income, or investments are tied to a currency other than the one you spend. A foreign stock or a holiday budget can gain or lose value purely because exchange rates moved, independent of any underlying performance. For long-term diversified investors the effect tends to average out, but for short-term needs it can matter a lot. Hedging or holding some assets in your home currency reduces the swing. Assetli converts your multi-currency assets at current ECB rates so you always see one consistent total.
Example
A $1,000 US investment is worth less in euros if the dollar weakens 10%, even if the stock price itself did not change.
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Related terms
Diversification
The practice of spreading investments across different assets, sectors, and geographies to reduce the impact of any single investment's poor performance.
Volatility
The degree to which an asset's price fluctuates over time; higher volatility means larger, less predictable swings.
Inflation
The rate at which the general price level of goods and services rises over time, reducing the purchasing power of money.
Explore more terms
Transaction Categorization
The process of classifying financial transactions into categories like groceries, rent, or entertainment to analyze spending patterns.
Recurring Transactions
Transactions that repeat at regular intervals — subscriptions, loan payments, salary deposits — essential for predicting future cash flow.
Bank Synchronization
The automated process of importing transactions from bank accounts into a financial management tool, either through API connections or file imports.
APR (Annual Percentage Rate)
The annualized cost of borrowing expressed as a percentage, including interest and mandatory fees, used to compare loan products.
Interest Rate
The percentage charged on borrowed money or earned on deposited/invested money, expressed as an annual rate.
IBAN
International Bank Account Number, a standardized format for identifying bank accounts across borders.