Max Ltd is due to receive $810,000 from a US company in 30 days time. It is now September 30^th. Max wishes to hedge exchange rate risk using currency futures.

Current spot rate is $1.5028/£

(CME £62,500), Futures contracts are currently available with the following rates:

December $1.5087

March $1.5098

June $1.5123

Assume the futures contracts mature at the end of the relevant month.

1. Evaluate the hedge if in 30 days, the spot rate (October 30^th) is $1.6703 and the Future price (October 30^th) for December contract is $1.6744
2. Explain why currency future contracts have not provided a perfect hedge.