Currency hedging is a way to reduce the effects of exchange rate fluctuations on investment performance. Simply put, this strategy removes the impact of currency volatility and evens out the increase or decrease in the value of an investment. Take for example, an Indian importer who needs dollars for making payments abroad. This importer may want to opt for a forex hedge that will protect a portion of the trade transaction if the rupee's value decreases against the dollar. Most hedges are typically intended to remove a portion of the exposure risk, and/or to protect profits. Currency options are one of the most cost-effective hedging strategy.