How can currency futures be used for speculating?

1. When would a U.S. firm consider purchasing a call option on euros for hedging? When would a U.S. firm consider purchasing a put option on euros for hedging?

Paraphrase the answer: A call option can hedge a firm’s future payables denominated in euros. It effectively locks in the maximum price to be paid for euros.

A put option on euros can hedge a U.S. firm’s future receivables denominated in euros. It effectively locks in the minimum price at which it can exchange euros received

2. Assume that the U.S. income level rises at a much higher rate than does the British income level. Other things being equal, how should this affect the (a) U.S. demand for British pounds, (b) supply of British pounds for sale, and (c) equilibrium value of the British pounds?

Paraphrase the answer: Assuming no effect on U.S. interest rates, demand for Canadian dollars should increase, supply of Canadian dollars for sale may not be affected, and the Canadian dollar’s value should increase.

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