Currency future

A currency future is a future markets product based on a currency.

What this means in practice is that it is a contract to exchange a currency at a particular exchange rate.

Why would people want to take out future currencies?

Well like many products and futures specifically, it is a hedging position. If a business is exposed to changes in an interest rate, then they can hedge against the problems that an adverse currency move would cause them by taking out a future in the other direction effectively.

Therefore currency futures are a popular product with many companies using them to try to keep their positions stable.

Related Articles

Interest Rate
European Central Bank
Interchange Rate

More Financial Words and Vocabulary Explained