If the net foreign exchange exposure is positive, it means that banks will face foreign exchange losses when the value of foreign currency against local currency declines. On the contrary, if the net foreign exchange exposure is negative, the bank will face losses when the foreign currency appreciates against the local currency.

In order to avoid exchange rate risk, banks can completely match the total amount of foreign currency assets held in a certain currency with the total amount of foreign currency liabilities, and at the same time completely match the amount of foreign currency bought and sold.