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always converting the cash flow to a fixed amount. For example, a cash flow forex hedge
would not be applicable for foreign-denominated variable interest rate debt, since the interest
variability would not be fixed. (A foreign interest rate swap—receive variable, pay fixed—
could be used instead to hedge foreign-denominated variable interest rate debt.)
Note that a cash flow forex hedge could be used for foreign currency purchases or sales because
the forex hedge would convert the variability of the amount paid or received in the foreign
currency to a fixed amount in the reporting currency. As noted earlier, the effective portion of
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