Currency Hedging
a.k.a. FX hedging
Using trades such as forwards or options to protect against losses from exchange-rate moves.
In plain English
Using trades such as forwards or options to protect against losses from exchange-rate moves.
Currency hedging is insurance against exchange rates. An importer who owes dollars in three months might buy them forward now, so a currency swing cannot blow up the budget.
Hedging reduces risk; it does not create profit. If the rate moves in your favour, the hedge gives that gain away too. See hedge.
Keep this word for good
Your free Private Swap Lounge saves the terms you’ve learned and quizzes you on them. Portal under construction. Expected delivery date is December 01, 2026.