What is currency risk?

Published: 12/4/2018
Learn how to avoid currency risk

There is a currency risk involved in loans denominated in a foreign currency or loans with a currency clause. Loans with a currency clause means loans where the amount of the loan granted is linked to the value of a foreign currency but all payments under such a loan are made in the domestic currency. For the purposes of this document, foreign currency means the currency other than that of our income or other means from which a loan is paid off. As regards currency risk, a change in the exchange rate of the negotiated loan currency in relation to the currency of our income may lead to an increase or a decrease in the monthly instalment or annuity. By negotiating a loan in the currency of our income you avoid currency risk.

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