One important purpose of the forward markets for foreign exchange allows global traders to protect themselves by ________.

Question

Quizplus · Accepted Answer

Forward markets for foreign exchange enable global traders to hedge their foreign currency exposures by entering into forward contracts. A forward contract allows traders to agree on a currency exchange rate today for the settlement of the trade on a specified future date. By locking in a predetermined exchange rate, traders can protect themselves against adverse movements in the foreign exchange market, reducing their risk exposure.

One Important Purpose of the Forward Markets for Foreign Exchange