In international investment and tra

In international investment and trade activities, exchange rate risk refers to the possibility of loss due to exchange rate fluctuations and the loss of expected earnings. Since the collapse of the international monetary system of the Bretton Woods system in the early 1970s, the fixed exchange rate system has been replaced by the floating exchange rate system. For example, in the case of TNCs or TNCs, if the currency of the host country depreciates during the investment operation, the value of the assets and real income of the host country will decrease, resulting in losses. For currency risk, we should also establish a corresponding early warning system. Otherwise, the company will face huge foreign exchange risk.