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<h1>Foreign exchange derivative contracts definition clarified: scope of hedging, contracted and anticipated exposures under FEMA regulations.</h1> The Regulations define Foreign exchange derivative contract as a future-settling financial contract deriving value from exchange rate movements between currencies where at least one is non Rupee, or from foreign currency interest rate changes, excluding currencies of Nepal and Bhutan and excluding cash, tom or spot deliveries. They also define Contracted exposure, Anticipated exposure, Currency risk, Hedging, and Exchange traded currency derivatives to frame permissible hedging and risk-management activity under the regulatory regime.