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Brief introduction of foreign exchange risk
Foreign exchange exposure mainly comes from currency mismatch of assets, liabilities and capital, as well as foreign currency profit and foreign currency statement translation. When there is foreign exchange exposure in a certain period of time, exchange rate changes may bring losses to the current income or economic value of banks, thus forming exchange rate risks. Banks need to transfer their foreign exchange positions in a timely manner with the help of inter-bank transactions, so as to spread their positions in various currencies equally, that is, long positions are thrown out, short covering.