FX forward

FX forward locks in the rate used in currency trades

FX forwards are suitable, for example, for hedging income and expenditure in foreign currencies. By entering into a forward, the company can ensure the FX rate used in a future currency trade in advance, thus hedging against changes in the FX rate.

In an FX forward, the bank and the customer agree on the rate used in a future currency trade, that is, the forward rate, the time of the trade, the currencies to be bought and sold and the amount of currency to be exchanged. The forward rate may be higher or lower than the prevailing FX rate, called the spot rate. The forward rate is based on the spot rate and the interest rate spread between the two currencies.

How does your company benefit from FX forward?

• Hedge against fluctuations in FX rates.
• You will know the rate used in a future FX trade in advance.
• You will not suffer from unfavourable FX rate changes but will not gain from favourable changes, either.