HEDGING FOREX

HEDGING FOREX

If you are new to forex, before focusing on currency hedging strategy, we suggest you first check out our forex for beginners to help give you a better understanding of how the forex market works.

A foreign currency hedge is placed when a trader enters the forex market with the specific intent of protecting existing or anticipated physical market exposure from an adverse move in foreign currency rates.  Both hedgers and speculators can benefit by knowing how to properly utilize a foreign currency hedge.  For example: if you are an international company with exposure to fluctuating foreign exchange rate risk, you can place a currency hedge (as protection) against potential adverse moves in the forex market that could decrease the value of your holdings.  Speculators can hedge existing forex positions against adverse price moves by utilizing combination forex spot and forex options trading strategies.

Significant changes in the international economic and political landscape have led to uncertainty regarding the direction of currency rates.  This uncertainty leads to volatility and the need for an effective vehicle to hedge the risk of adverse foreign exchange price or interest rate changes while, at the same time, effectively ensuring your future financial position.

Currency hedging is not just a simple risk management strategy, it is a process.  A number of variables must be analyzed and factored in before a proper currency hedging strategy can be implemented.  Learning how to place a foreign exchange hedge is essential to managing foreign exchange rate risk and the professionals at CFOS/FX can assist in the implementation of currency hedging programs and forex trading strategies for both individual and commercial forex traders and forex hedgers.  For more hedging information, please click on the links below.