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What is a Currency Forward Contract & how do they work?
What is a currency forward contract?
If you want to hedge your currency exposure, a currency forward contract is one of the simplest and most accessible ways to do so.
In simple terms a currency forward contract is an agreement between the client and international payment provider (Currency Online Group) to fix a currency exchange rate for a future overseas payment.
This can be done for a period of up to 2 years but usually requires a deposit to secure this.
Advantages of undertaking a currency forward contract
Setting a forward currency contract allows businesses to be certain of costs around an international payment when budgeting future expenses.
In turn this mitigates currency risk and protects the company’s bottom line profit. With outside factors affecting the currency market daily, fixing a contract eradicates the risk of volatility and allows you to devise a clear financial plan around your overseas payments while making sure your international suppliers are paid on time.
With the future exchange rate locked in it means the price of the contract cannot change for the given date. This means the rate can move resulting in a favourable gain for the client.
How to arrange and agree a currency forward contract with Currency Online Group
If you feel a currency forward contract is best suited to your overseas payment needs, your first step will be to contact our International Payments Team on 0208 050 1546, where an account manager will guide you through the process of account set-up and discuss fixing the exchange rate. Going forward the account manager will be available to discuss any queries you have and can also explore any other FX solutions that may be of use to you or your company.