The reduction or covering of a foreign exchange risk is called

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Hedging involves taking steps to reduce or cover the risk of unfavorable fluctuations in exchange rates. This can include using financial instruments such as forward contracts, options, or futures to mitigate the impact of currency fluctuations on investments or transactions. Speculation involves taking a view on the future direction of exchange rates and making trades on that basis, while intervention refers to the actions of central banks or governments to influence the value of their currency in the foreign exchange market. Arbitrage involves taking advantage of price discrepancies between different markets to make a profit.

The Reduction or Covering of a Foreign Exchange Risk Is