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  • 10.8.5-RISK AND THE RELATION TO TRADE CREDIT-CURRENCY RISK

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  • Currency risk

     
     
    When advances in United States dollars are immediately turned into coffee stocks that will later be sold in United States dollars, the currency risk is limited and mostly of local concern. Nevertheless, if the local currency subsequently loses value then other traders or exporters may lower their United States dollar offer prices, thus reducing the United States dollar value of unsold stocks, a market reaction that may put recovery of the original United States dollar advance at risk. See also 10.02.06.