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Foreign exchange (FX) risk generated in first-world countries is readily managed by tapping into the deep and liquid hedging options that are available. However, organizations doing business in emerging markets—whether companies, charities, or investment funds—face a significant and double-edged challenge. First, emerging-market currencies are typically more volatile than major currencies. And second, hedging instruments may not exist for these currencies. Where hedging instruments do exist, they are often prohibitively expensive, due to forward points.

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