Currency hedging is most commonly carried out with forward contracts, which are agreements with a counterparty to buy or sell one currency against another at a pre-specified exchange rate and time. The agreed upon exchange rate (the forward rate) is a function of the existing spot rate and short-term interest rates in the hedged and base currency. Source: A Short Course in Currency Overlay.

An article I like is Currency Hedging for International Portolios: https://www.imf.org/external/pubs/cat/longres.aspx?sk=23994.0

Quote: Currency hedging is most commonly carried out with forward contracts, which are agreements with a counterparty to buy or sell one currency against another at a pre-specified exchange rate and time. The agreed upon exchange rate (the forward rate) is a function of the existing spot rate and short-term interest rates in the hedged and base currency. EndQuote. Source: A Short Course in Currency Overlay.

An article I like is Currency Hedging for International Portolios: https://www.imf.org/external/pubs/cat/longres.aspx?sk=23994.0