What is currency translation exposure? Provide an example to illustrate your answer

What will be an ideal response?

The risk of exchange-rate volatility results in currency translation exposure to the firm when the balance sheet of the entire corporation is consolidated, and may cause a negative cash flow from the foreign subsidiary. Currency translation exposure occurs when the value of one country's currency changes relative to that of another. When exchange-rate changes are radical, repercussions are felt around the world. For example, a U.S. company operating in Mexico at the time of the peso devaluation in the late 1990s meant that the company's assets in that country were worth less when translated into U.S. dollars. The company's liabilities, however, were also less.