When a domestic exporter desires to hedge a foreign currency receivable using an FX forward, the exporter will contract to sell a specified number of foreign currency units.

Question

Quizplus · Accepted Answer

By entering into a forward contract to sell a specified number of foreign currency units, the exporter locks in a specific exchange rate for converting the foreign currency receivable into their domestic currency, thus hedging against exchange rate fluctuations.

When a Domestic Exporter Desires to Hedge a Foreign Currency