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How can emerging market economies avoid the problems of currency mismatch?

How can emerging market economies avoid the problems of currency mismatch?

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In the emerging market economies buyer and a seller who are in different nations rarely use the same currency. The payments are generally in the seller's or buyer's currency or in a third mutually acceptable currency. The main problems associated with the international trade are the risk of currency mismatch. Foreign exchange risk refers to the financial risk faced by an investor investment due to problems of currency mismatch. Although earlier it was an unavoidable risk of foreign investing, however today in emerging market economies the problem can be mitigated considerably with the usage of the money markets, foreign exchange derivatives such as futures contract, forward contracts, swaps and options or applying the operational techniques such as currency invoicing, exposure netting and lagging and leading of payments and receipts.

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