My question is about the theoretical possibility and a running example on if it's possible to use currency futures as a hedge in the following scenario:
I have some money sitting under Indian fixed income investment accounts. These are like the typical CD accounts in the United States that are FDIC insured. The fixed rate of return out there is between 8-9% per year. I've had these investments on for about 3-4 years (and the previous generation in my family has had these for 20+ years).
The catch of course, behind this seemingly high rate of return, is the inflation. The Indian Rupee vs. US Dollar is here:
https://www.google.com/finance?q=USDINR
[Side note: For argument sake, there are things you can buy in India at the beginning of the year, whose cost does not rise with inflation towards the end of the year. So say, I was to use the 9% profit only towards buying hamburgers, I can argue that I've made a true 9% profit.. However, something like say, real estate, will cost more say 6-8% towards year end from inflation in the grand scheme of things, so using no true profit if I am to use my profits on that front..]
Can someone explain to me:
1 Is it possible to make a separate trade on the side, using something on the lines of currency futures etc. to lock in exchange rates? I don't understand this world, but I keep hearing merchants that do import/export businesses across countries do something on these lines.
2 If something indeed is possible, can someone walk me through a simple running example, logistics and implementation of this trade?
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