25.6.1 Market for Currency Futures

Besides the spot and forward markets, currencies are also traded in the market for currency futures and the market for currency options. These two markets are known as the market for derivatives insofar as the prices in these markets are driven by the spot market price. The market for currency futures came into being in 1972 in the USA. It is at present found at many important financial centres.

A currency futures contract involves trading of an underlying currency at a specified exchange rate and for a fixed maturity period. In many other respects too, it is different from a forward contract. The size of a futures contract is standardised involving a fixed amount of different currencies. ...

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