If an academic group receives a multi-year grant denominated in a currency different from that that they pay salaries, can they use some of the grant to hedge against changes in the relative value of the two currencies?
Some years ago I was a member of a group in the UK that received a substantial five year grant from the US. Between the awarding of the grant and the time we started employing staff the pound dropped against the dollar, meaning we could have employed more staff than we originally estimated. However, because of the risk that the exchange rate reversed over the time of the grant the "bean counters" did not let us take this option. In the end the pound remained somewhat low and we had excess money in the grant in the final year. The project could have been much more productive if that money had been spent on more staff in the beginning.
If this was a private company they would have the option of hedging the risk, ie. taking some position on the currency markets such that whatever the exchange rate does the money available would be roughly similar. Is an academic group allowed to take such a futures position in the forex markets?
While I am not in this situation at the moment, considering the substantial drop in the value of the pound that has occurred since the July NIH funding round I suspect many people are, and the magnitude of the change is much greater than has occurred in recent years.