You are considering purchasing HKD-bonds. An investment advisor informs you "You can exchange USD for HKD in the spot exchange market, invest in in a risk-free, one-year HKD bond, and use a one-year forward contract for converting the proceeds back into USD". Spot exchange rate (HKD/USD) =0.1714 One-Year HKD interest Rate =2.20% One-Year Forward Rate (HKD/USD) =0.1724 If you are going to use the investment advisor's strategy, in order to reduce the exchange rate risk of the HKD investment, you should: sell USD spot sell USD forward sell HKD forward