From: Ronald W. Heiby (heiby_at_falkor.chi.il.us)
Date: Mon Nov 05 2001 - 10:56:51 EST
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If you want to insulate yourself from the effects of currency
fluctuations between your currency and the US$, then you can do so by
dealing in currency futures. Investing in this way allows you to have
price stability relative to the US$, because the value of the futures
contract will be fluctuating in such a way that it hedges your
ownership in CA$. Of course, this is not practical for a $100
transaction, but there are a surprising number of companies that deal
in large amounts of "foreign" currency that do not know how to reduce
or eliminate their exposure to currency fluctuations. Just as there
seem to be large numbers of farmers who do not know how to eliminate
their exposure to commodity price fluctuations, then get surprised
when the price of their crop goes down after it is too late to plant
something else.
Ron.
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