Matthew_ Allen

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How do exporters and importers use forwards for currency protection?

Exporters face risk when foreign buyers pay in another currency, while importers face risk when suppliers demand payment in foreign currency. Forward contracts lock in exchange rates for future transactions, ensuring certainty. Institutions design forwards tailored to trade cycles. Retail-level SMEs (small and medium enterprises) can access forwards through banks. Benefits: budget certainty and reduced risk. Risks: missing out on favorable currency moves. For traders, forwards illustrate risk trade-offs: security vs. opportunity. Export-import hedging ensures global trade flows are not crippled by forex volatility.