An Australian farmer has been contracted to sell 1000 tonnes of oranges to an American juice manufacturer at a set price - HSC - SSCE Business Studies - Question 19 - 2021 - Paper 1

The most effective method of hedging for the American juice manufacturer would be to use a derivative to protect themselves from a falling American dollar. This is because the payment is required in Australian dollars, and if the value of the American dollar decreases, they would have to spend more American dollars to purchase the same amount of Australian dollars. Therefore, option D: 'The American manufacturer using a derivative to protect themselves from a falling American dollar' is the correct choice.