If I entered into a contract for a year or two which obliged me to make regular payments in US dollars, what would be a good way to protect myself against movements in the exchange rate with respect to sterling? Is there any straightforward insurance-based product?
Forward contracts - you can buy forward (assuming the amounts you are talking about is worth it) through the foreign exchange dealers at your bank (not counter staff!). The beauty of this is that you know the exact amount that x worth of $ will cost you in the future. Beware though as there are different types - some you are committed to buy even if the rate goes against you - others the bank will let them lapse but you'll pay in the rate.
If the sums involved aren't large, the cheapest way to do it is probably to put the money in a US$ bank account.
I thought much the same, but then realised that if the sums aren't large what's the point in bothering to do any hedging?
tim
Though there are plenty of foreign exchange companies who might be able to give you a better rate than your bank...
'worth it' in this case is probably minimum $10,000.
Theo
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