4.6.1 The Operation of the Currency Forward Market
Currency forward contracts are usually provided by banks. If an Indian exporter needs to enter into a U.S.
dollar forward sell contract, they will approach a bank authorized to deal in the foreign exchange for the
same. e bank will quote the forward rate, and the contract will be nalized.
Banks take a risk by entering into a forward contract. For the exporter, there is no risk, because they
have an open position in a foreign currency that they are covering with the forward contract. An open
position means that the exporter is exposed to foreign exchange risk. is exposure to foreign exchange
risk arises because the exporter will be receiving U.S. dollars aer 90 days ...
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