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if exchange rate usd 2-3 / 1 pound
1)For money market hedging, Co at uk
Payment/Receipt of 20,000usd, usd 3 should be used in the calculation ?
2)co at US , payment / receipt in pound
convert pound to usd , so USD 2 is chosen ?
If there is a payment in USD then you would use 2 (whether the payment is relating to money market hedging is of no relevant – any payment of USD would be converted to Pounds using 2)
If there is a receipt in USD then you would use 3 to convert to Pounds.
I do suggest that you watch my free lectures on foreign exchange risk management. I spend time discussing which rate to use (and why), and obviously also go through money market hedging in detail.
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