Currency Futures

Currency futures are quoted in US dollars and cents. For example, if the set price for the Australian dollar futures contract is $0.7168, then this contract has a value of $71,680.

Currencies futures include the following:

• Japanese yen
• Canadian dollar
• British pound
• Swiss franc
• Australian dollar
• Mexican peso
• Euro / Us dollar
• Euro / Japanese yen
• Euro / British pound

As with interest-rate futures, the difference between hedgers and speculators in currency futures is that hedgers participate in the cash markets as also in the negotiation of currencies. Multinational companies use currency futures to hedge their currency positions by locking in a rate as to preserve their gains in international trade . For example, let?s pretend that a company makes a significant number of negotiations with Australian companies, and the Australian dollar fluctuates daily against the US dollar. If the company expects and waits for Australian dollar to raise against the US dollar, the company would buy a futures contract to lock in the price. If the company would have locked in a lower price for a future delivery of the contract. Equally, if the company anticipates a fall in the Australian dollar, the company would sell short the Australian dollar futures contracts for future delivery. If they are right and the Australian dollar does not decline the company will profit.

The company would buy Australian dollars in the cash market at the lowest price and deliver them as it is required in the contract, which was sold short at a higher price.

Beginner Money Investing Financial Futures and Interest-rates Currency Futures Stock Index Futures