An FI usually creates an open position by taking an unhedged position in a foreign currency in its FX trading with other FIs.

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An FI typically creates an open position by taking an unhedged position in a foreign currency in its FX trading with other FIs. This means that the FI is exposed to fluctuations in the exchange rate of the foreign currency, which can result in gains or losses depending on how the exchange rate moves. However, FIs may choose to hedge their foreign currency positions to reduce their exposure to exchange rate risk.

An FI Usually Creates an Open Position by Taking an Unhedged