Hedging in the Currency Markets

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Hedging is about elimination or reducing risk.  In financial markets, hedging refers to a transaction designed to insure against an adverse price move in some underlying asset.  In the forex market, hedgers are looking to insure themselves against an adverse price movement in a specific currency rate. When we hedge at Currency Traders Club we follow a variety of hedging strategies and can utilize several different currency hedging instruments.  Currency Options can be used to eliminate downside currency risk and sometimes allow the hedger to participate in advantageous price movements. Currency forward transitions essentially lock in a currency price for a future date , based on the current spot rate and the interest rate differentials between the two currencies.

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