The exporter can protect his exposure to the dollar by entering into forward contract or purchasing an option.A forward contract is used to control and hedge risk without having to worry about whether the spot market is going to move against you. This overcomes one of the major problems that you can experience when importing or exporting in foreign currencies, as you can now budget at a guaranteed rate of exchange. You remove the risk of being exposed to future fluctuations in the underlying currency by locking yourself into the forward rate. The buyer enters into the contract to protect itself from a future increase in currency exchange rates and wants to fix its borrowing costs today. The seller wants to protect itself from a future decline in the currency exchange rates. This strategy is used by investors who want to hedge the return obtained on a future deposit / payment.An option is a contract that conveys to its owner the right but not the obligation to buy or sell the underlying currency at a specified price on or before a given date in the future. The exporter may buy an option for protection against adverse currency exchange rate movements. In return for this protection, a premium is paid.