- Exchange Risk: As there is an increase in the volume of cross border transactions and international trade, exchange rate risk arises. It refers to the risk of adverse movements in the currency exchange rates of two economies. For example, a US importer, who is in the business of importing goods from China, is negatively impacted in the case of dollar depreciation. This is because, to pay in Chinese Yuan, the US importer would be shelving out more dollars. However, the exporter benefits in the case of dollar depreciation with respect to the Chinese Yuan. This is because this means greater receipts in the domestic currency. This leads to the conclusion that the nature and exposure to the risk depends on the position of the party to the contract in the context of the risk.