How to use forex for hedging?

[swanger]

Hi

I'm a noob in forex being equities and futures trader.

I would like to hedge my exposure to USD. My home currency is SGD.

If I have USD$25000 that i want to hedge should I buy USD.SGD 25000 or sell USD.SGD?

Alternatively would I be able to hedge using USD.JPY and JPY.SGD if my broker does not have USD.SGD?

Thanks

 

[ns1000]

You're dealing on the first named currency, so if you want the USD to go up, but USDSGD. If you have USD and want to hedge against it falling, you want to profit if the USD loses value, so you sell.

You can hedge using two cross rates, but it gets much more expensive and prone to error. Most brokers will offer SGD crosses.

 

[GammaJammer]

If a broker doesn't have usdsgd it's very unlikely they'll have sgdjpy. so you'll most likely be able to hedge using straight usdsgd, or not at all.

 

[Rhody Trader]

If you can't get USD/SGD then the other alternative is to either short the USD Index via futures or to created a basket position by shorting the USD against the other major currencies. Either will help protect against a general USD decline, but obviously won't cover anything specific to the SGD relationship.

 

[GammaJammer]

usdsgd / dxy daily correlation currently running around 91% on a 30day basis. Pretty consistent, with the odd hiccup.....

 

[swanger]

Thanks for all the replies! Cheers