FX & Risk Management
FX Hedging: Protecting Your Money from Currency Risk
Learn how hedging strategies reduce exposure to currency fluctuations, whether you’re a trader, business owner, or investor.
What is FX Hedging?
FX hedging is the process of reducing or eliminating your risk from changes in currency exchange rates. This is done by taking an opposite position in the forex market to balance potential losses.
Common Hedging Tools
Forward Contracts
Lock in today’s exchange rate for a transaction in the future. Useful for importers/exporters.
Options
Buy the right, but not the obligation, to exchange at a certain rate. Provides flexibility.
Currency ETFs
Trade exchange-traded funds that track foreign currencies as a way to offset risk.
When to Hedge
- When managing international payroll or invoices
- When holding foreign-denominated investments
- When traveling frequently and budgeting in multiple currencies