If I hedge a currency exposure of country A through a forward rate (which converts into currency of country B), how does it imply borrowing in country A and lending in country B?
If you borrow in A and lend in B, then at the end of the loan period you’ll receive B and repay A, just as you’re doing in the forward contract. The amounts you’ll receive and repay will be today’s amounts increased by the respective interest rates, just as is happening in the forward contract: the exchange rate increases by B’s interest rate and decreases by A’s interest rate.
I have understood what you said, but can’t figure out my doubt through this, can you try saying in a different way?