Currencies hedged against USD in forex trades
2023-09-04
Summary:
Hedging is common in forex, especially with the US dollar as the benchmark. It reduces risk and seeks profits.
Hedging is a method of trading in the foreign exchange market, and the most commonly traded currency in foreign exchange trading is the US dollar. If you use the US dollar for hedging or other currencies or precious metals to hedge against the US dollar, you need to choose to hedge against the US dollar in the opposite direction.
The US dollar can be used to hedge against many currencies, which means you can buy one currency with the US dollar and sell in another currency to balance risk and profit.
Firstly, we can hedge the US dollar against the euro. This is because the US dollar and euro are two of the two most important currencies in the world. If you think the US dollar will appreciate, you can buy euros in US dollars to hedge your risk in other currencies.
Secondly, the US dollar can also be used as a hedge against sterling. The pound is the currency of the UK, while the US dollar is the currency of the United States. It is usually used to hedge transactions between the pound and the US dollar, making it one of the first choices for risk-averse investors. If you think the pound will depreciate, you can buy it in US dollars to protect your investment.
In addition, the US dollar can also be used as a hedge against the Japanese yen. The Japanese yen is the currency of Japan, while the US dollar is the currency of the United States. If you think the yen will depreciate, you can buy it in US dollars to reduce your risk in the Japanese market.
In addition to the above currencies, the US dollar can also be used as a hedge against many other currencies, such as the Canadian dollar, Australian dollar, Swiss franc, etc. These currencies are commonly used in international trade, so hedging against the US dollar can help you balance risks.
Hedging the US dollar against many currencies can help you protect your investment, reduce risk, and seek profit opportunities between different currencies.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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