Economic currency risk

Economic exposure extends beyond identified foreign-currency invoices. Exchange movements can change competitors' prices, input costs, customer demand and the attractiveness of production locations. A business trading entirely in its domestic currency can still be exposed through overseas competitors. Managing the exposure may involve sourcing, market diversification, production choices and pricing strategy, alongside financial hedges where useful. It is usually less precisely measurable and harder to hedge completely than a known transaction, because future business responses and volumes are uncertain.