Look at it this way: you invest $100k, they convert it to the foreign currency at the current exchange rate. Time marches on, the interest accrues as promised. When the CD matures, they then convert it back at the new exchange rate, and that’s what you wind up with. If the dollar rallies against the other currency, your return will be higher than the CD yield. If the other currency rallies against the dollar, your return will be lower than the CD yield. You potentially could lose principal.
FDIC only protects you if the bank fails. It will not protect you against currently fluctuation. You didn’t post a link, but this will be explained in the fine print. Here’s the fine print at Everbank:
