Mr. Talley also suggested that clients use foreign currency contracts to hedge against the dollar's volatility.
Late in 1994, Mr. de Kwiatkowski purchased foreign currency contracts worth approximately $6.5 billion, and lost an estimated $215 million a few months later.
Especially in a country where the currency is volatile, you may want to buy a foreign currency contract that locks in your exchange rate, for your fixed local expenses, she said.
On September 2nd the finance minister, Thanong Bhidaya, promised regularly to disclose the central bank's forward foreign-currency commitments—a statistic the bank had hitherto refused to release.
NEW YORK TIMES Regulators Sue Foreign-Currency Traders | The Commodity Futures Trading Commission is suing 11 firms it claims sold foreign-currency contracts without registering with the agency.
Although Greek hoteliers worked in foreign-currency contracts before the euro was introduced, if they were forced to contract in drachmas after an exit, then their revenues would fall, too.Second, the prospect of lower costs is likely to be illusory.
The value of foreign-currency contracts intended to insulate it from sharp swings in the dollar versus the euro also deteriorated during the quarter, eating into earnings, EADS said.
But that will be counterbalanced by a new squeeze on liquidity: a 90-day freeze on forward foreign exchange contracts, which will leave companies scrambling for hard currency to pay their overseas suppliers.
Worse still, orders are booked in dollars, but to cover local production costs shipyards buy forward currency contracts, transforming their obligations into won.
So it might try to protect itself by locking in an exchange rate using forward currency contracts, perhaps.Derivatives are also commonly used by both financial and non-financial firms when they raise capital.
There are three principal techniques designed to meet the requirements of international trade operators in covering exchange risks: the fixed forward contract, the option forward contract, and the foreign currency option.
