Daniel P656_ Thompson#73

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How do emerging market governments hedge currency risks?

Emerging markets borrow in foreign currencies, exposing them to repayment risks. Governments hedge using swaps, reserve accumulation, and IMF arrangements. Institutions monitor sovereign hedging to gauge stability. Benefits: reduced risk of default. Risks: inadequate hedging leads to crises (e.g., Asian Financial Crisis 1997). For traders, government hedging flows can drive long-term forex trends. It highlights that forex is a battlefield not only for traders but also for nations managing survival.