Eli5: what is a euro/dollar futures contract is and what does it hedge against?

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Thank you!

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In general, a future is an agreement between two parties to sell something at a particular price, but require payment of that price (and delivery of the thing being traded) at some time after the agreement is made. This hedges against possible changes in the price of what one is buying.

If I need US dollars — say, to buy oil — and I have Swiss francs, I would want to buy dollars. However, I might think that the price of a dollar today is not going to be the same when I *need* the dollars to buy something later. I might find a currency broker and agree to purchase dollars at today’s price in francs, but to pay for and receive the dollars sometime next month when I plan to buy oil.

If I believe the price of dollars will go up before I need them, this lets me acquire the amount I need, when I need it, for a better price than if I were to instead wait and buy them outright at that time.