Why trade in currency futures?
A currency futures contract allows for three things:
Participants with exposure in currency can use futures to manage risk arising from unfavorable exchange rate movements
Participants with a view on the Forex market can trade futures to profit from these views, just like stocks or commodities or any other asset class
Entities with access to both Exchange traded Futures and OTC markets, or different exchanges can exploit arbitrage arising due to pricing differences
What are currency futures?
Currency Futures are standardized contracts to buy or sell a currency at a future date at a rate determined in advance. The contracts are traded on regulated exchanges in accordance with the guidelines specified in the RBI-SEBI Standing Technical Committee Report on Exchange Traded Currency Futures, 2008.