A currency future is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date.
HEDGING :To hedge means “to minimize loss or risk”. It means, taking a position in the futures market that is opposite to a position in the physical market, with a view to reduce or limit risk associated with unpredictable changes in the exchange rate.
ARBITRAGE : It means locking in a profit by simultaneously entering into transactions in two or more markets where there is a price differential of the same underlying. If the relation between forward prices and futures price differs, it gives rise to arbitrage opportunities. If there is price differential between two exchanges, it gives rise to arbitrage opportunities.
FINANCIAL LEVERAGE : By putting an upfront margin of (say) 5%, a client can trade in currency futures. Thereby, leveraging his capital.
CASH SETTLED : No requirement of an underlying to trade in currency futures.
Minimal cost of trading : Fees for corporate clients and individual clients tailored to suit their requirements.
– (Govt. /Exchange taxes, charges, levies extra, as applicable)