Currency risk management

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Factors
Exchange rate fluctuations are the main factor in the emergence of currency risks. They depend on interest rates, the inflation rate, the export structure of the country's economy and the general state of the currency market.

For example, when interest rates rise, investors algeria whatsapp number data tend to invest in the national currency. Rising inflation affects the depreciation of the national currency against the currencies of other countries where the economy is more stable.

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The development of exports is directly linked to the increase in demand for the country's goods and the currency to pay for them.

Countries can influence the exchange rate by selling or buying currency from their reserves. Joint actions by several countries can significantly change the dynamics of the rates.

Political instability also affects confidence in the national currency.



To manage this type of risk, it is important to assess the currency risk: how dangerous or, on the contrary, beneficial it is for the company; what losses it entails.

To influence the reduction of currency risk, companies and banks apply special currency risk management strategies. Let's consider the main methods of currency risk: