When a u.s. corporation or investor receives foreign currency cash flows, the u.s. dollar value of those cash flows will decrease if the foreign currency depreciates against the u.s. dollar.
From the perspective of a US money manager, the cash flows of bonds denominated in a foreign currency expose the manager to uncertainty as to the cash flows in U.S. dollars.
The actual U.S. dollars that are received depend on the exchange rate between the U.S. dollars and the foreign currency at the time the non-dollar cash flow is received and exchanged for U.S. dollars.
If the foreign currency depreciates(declines in value) relative to the U.S. dollar(i.e. the U.S. dollar appreciates), the dollar value of the cash flows will be proportionately less. This risk is referred to as foreign exchange risk.
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