Glosario

A short currency is the creation of an offsetting short FX position with forward contracts, in order to neutralize any gain or loss on an original ‘long’ currency exposure by a corresponding foreign exchange loss or gain on the hedge. For example, a U.S.-based exporter sells EUR 100,000 of goods worth to a European customer is said to be ‘long’ EUR since EUR will be received from the sale. In order to hedge that position, the firm undertakes a short currency hedge by selling an equivalent amount of EUR in the forward market, with a value date matching the settlement of the business transaction.