How do exchange traded currency futures enable hedging against currency risk?
On a currency exchange platform you can buy or sell currency futures. If you are an importer you can buy futures to ‘lock in’ a price for your purchase of actual foreign currency at a future date. You thus avoid exchange rate risk that you would otherwise have faced. On other hand if you are an exporter, you sell currency futures on the exchange platform and ‘lock in’ a sale price at a future date.
