Currency futures are needed if your
business is influenced by fluctuations in currency exchange rates. If you are in
India and are importing something, you have done the costing of your imports on
the basis of a certain exchange rate between the Indian Rupee and the relevant
foreign currency. By the time you actually import, the value of the Indian Rupee
may have gone down and you may lose out on your income in terms of Indian Rupees
by paying higher. On the contrary, if you are exporting something and the value
of the Indian Rupee has gone up, you earn less in terms of Rupees than you had
anticipated. Currency futures help you hedge against these exchange rate risks.
