Competitive Currency Risk

Currency exchange rate risk that affects a firm's competitiveness in a product line also produced by a competitor whose costs are incurred in a foreign currency. If the competitor's currency weakens, his relative competitive position improves because his costs decline relative to international competition. A producer facing competition of this sort can use currency contracts to match the competitor's cost structure for the duration of available contracts. See also Economic Hedge, Economic Risk.

Glossary * C