Currency Futures

What are 'Currency Futures'

Currency futures are a transferable futures contract that specifies the price at which a currency can be bought or sold at a future date. Currency future contracts allow investors to hedge against foreign exchange risk.




BREAKING DOWN 'Currency Futures'

Because currency futures contracts are marked-to-market daily, investors can exit their obligation to buy or sell the currency prior to the contract's delivery date. This is done by closing out the position. With currency futures, the price is determined when the contract is signed, just as it is in the forex market, only and the currency pair is exchanged on the delivery date, which is usually some time in the distant future. However, most participants in the futures markets are speculators who usually close out their positions before the date of settlement, so most contracts do not tend to last until the date of delivery.

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    Futures contracts are one of the most common derivatives used to hedge risk. A futures contract is as an arrangement between ... Read Answer >>
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