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What is Currency Derivatives? Meaning and Uses

What is Currency Derivatives? Meaning and Uses

AUTHORSuraj Puneli

What are currency derivatives?

Currency derivatives are contracts to buy or sell currencies at a future date. The major types of currency derivatives are forward contracts, futures contracts, options and swaps.

Despite having an average daily turnover of Rs 44,859 crores, currency derivatives in India are largely unknown to small retail investors.

The currency derivatives trading segment in India is dominated by importers, exporters, central banks, banks and corporations.

While currency derivatives in India are primarily used for hedging, retail investors can create wealth in the currency derivatives segment by speculating and arbitraging.


How can you trade in currency derivatives?


Currency derivatives trading is no longer a difficult task and can be done from the comfort of your home, with the best forex broker in India - JK securities.

JK securities is a SEBI authorized currency broker, with a flat brokerage charge of Rs 100/trade irrespective of the trade size. JK securities` trading platform works at lightning speed so you do not miss any action. JK securities also offers the best leverage ratio, which can maximize your profits.

You can read the detailed benefits of opening a currency trading account with JK securities to ease your decision making.

The bottom line is that although currency derivatives are not popular among retail investors, they provide excellent wealth creation opportunities and deserve to be a part of a retail investor’s portfolio.


What are the uses of currency derivatives?

Currency derivatives in India are primarily used for:


Hedging: By importers / exporters and other hedgers

Speculating: By speculative traders

Arbitraging: By arbitrage traders

Benefits of Currency Derivatives

Hedging – Hedging protects the trader from foreign currency exposure and reduces losses by using currency derivatives. It also helps exporters and importers to generate profits or cover up losses during currency fluctuations.

Trading – In trading, Currency and futures options allow you to trade on short-term market movements while keeping an eye on the direction of movement. Currency Derivatives help traders to yield profits from the forex market by simply strategizing the investments.

Arbitrators - Some markets and exchanges allow you to take advantage of currency exchange rates by trading currency derivatives. Even a minimal price difference can yield profits in currency derivatives.

There are many benefits in currency derivatives services and trading offered by trusted platforms such as JK securities, Motilal Oswal. If you too wish to try your hand at online forex trading,  open a currency trading account with investment plans.


Currency trading is one of the most profitable investment options for retail investors. It offers an opaque and closed market in which most banks and financial institutions trade. The foreign exchange-based currency derivatives segment and currency derivatives consultants are regulated and transparent. A market that small businesses and even individuals can use to hedge their currency exchange risk.

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