The currency risk of an exporter can be reduced by:
A) hedging, using the foreign exchange futures.
B) transacting only in the currency of the exporter's own country.
C) buying a forward contract for the exporter's currency.
D) all of the given choices.

Question

Quizplus · Accepted Answer

All of the given choices are viable options for reducing currency risk of an exporter. Hedging using foreign exchange futures can help to lock in a rate and protect against currency fluctuations. Transacting only in the currency of the exporter's own country eliminates the need for currency conversion, hence mitigates currency risk. Buying a forward contract for the exporter's currency enables the exporter to lock in a predetermined exchange rate for future transactions.

The Currency Risk of an Exporter Can Be Reduced By