Currency risk is another name for foreign exchange risk: the possibility that a change in exchange rates will reduce the value of a payment, an asset, a liability or a business's earnings when measured in its home currency. "Exchange rate risk" and "FX risk" mean the same. Investors tend to say currency risk; corporate treasurers and banks more often say foreign exchange risk.
The risk arises whenever there is a currency exposure, that is, a gap in time or amount between money held or owed in one currency and obligations in another. An exporter that invoices in dollars but pays wages in rupees is exposed between the sale and the receipt. An investor holding foreign shares is exposed for as long as the shares are held. A payment company that quotes a customer a fixed rate and converts later is exposed in between, and one that keeps balances with partners abroad is exposed on those balances.
Practitioners usually divide the subject into transaction risk on specific payments, translation risk on the accounts of foreign subsidiaries, and economic risk to long-term competitiveness. It is managed by matching currencies of income and cost, a natural hedge, or with forwards, swaps and options, as described under FX hedging.