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Another way to mitigate currency risk is to diversify your markets, or the countries and regions you trade with. By diversifying your markets, you can reduce your dependence on a single currency or market, and spread your risk across different exchange rates and economic cycles.

One way that firms can limit their exposure to changes in the exchange rate is to implement a hedging strategy. By purchasing currency swaps or hedging through futures contracts, a company is able to lock in a rate of currency exchange for a set period of time and minimize translation risk.

The two primary methods of hedging are through a forward contract or a currency option. Forward exchange contracts. A forward exchange contract is an agreement under which a business agrees to buy or sell a certain amount of foreign currency on a specific future date.

Currency speculation is the act of buying and selling the money of various countries in order to take advantage of fluctuating exchange rates. Some speculators make many transactions each day with one or more currency pairs, while others purchase a large amount of one currency and then hold on to it for a longer time.

The two primary methods of hedging are through a forward contract or a currency option. Forward exchange contracts. A forward exchange contract is an agreement under which a business agrees to buy or sell a certain amount of foreign currency on a specific future date.

To reduce the value of a currency there are a few policies the government could adopt. Looser monetary policy ? cutting interest rates. Looser fiscal policy ? cutting tax and increasing government spending. Selling reserves of currency on the foreign exchange market and buying rival currencies.

Cross currency triangulation works by first converting the monetary amounts from one national currency unit (source currency) into an intermediate currency (anchor currency). The calculation then coverts the amount in the intermediate currency into the designated national currency unit (target currency).