Posted by forex at 5:48 AM
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1. Identify your foreign exchange exposure and assess the risks you have. Are the currencies you are exposed to volatile? What are experts' forecasts of exchange rate movements?
2. Figure out what you need to achieve with your FX hedge. What amounts of foreign currency do you need to hedge and to what degree?
3. Consider a wide range of hedging options. Does it make sense for you to buy the required amount of currency now? Should you go into a contract to buy a specified amount of currency in the future? Should this contract be standardized or optional on your part, giving you the right but not the obligation to exchange currencies at a certain rate?
4. Consult hedging professionals. Hedging FX risk is difficult without specialized knowledge and experience. FX hedging specialists will help you construct your hedging strategy.
5. Carry out your strategy. Be ready to change any of its parts, as foreign exchange market conditions change.