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FORWARD FOREIGN CURRENCY CONTRACTS

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FORWARD FOREIGN CURRENCY CONTRACTS

This is the purchase of currency that allows you to fix an exchange rate to be used at a date in the future, anywhere from 1 week to 2 years.
— Liam Alexander, Commercial & Dealing Director

Forward contracts are especially useful for businesses as they allow clients to avoid risk by protecting against currency fluctuations, along with providing a fixed price to assist with budgeting and the protection of profit margins.

There are two main types of Forward Contract :

  • Fixed Forward Contract : A fixed forward defines a single future date to transact the full amount of currency bought or sold
  • Open Forward Contract : An open forward allows you to ‘draw down’ any increment/s of the full amount of funds bought or sold up until the expiry date of the booking

Locking in an existing rate to be used at a later date hedges any risk of market downturn, avoiding potential losses that can occur within the time frame of the forward contract.

An Open Forward Contract allows you more flexibility and control with your money through incremental draw downs.

Mitigating risk

What you need to know…

  • Once the forward contract is agreed, the rate does not change if the market moves against you or in your favour.
  • A deposit is usually required for forward contracts.

For all enquires please fill in the form below. We will respond to your queries in as much detail and as quickly as possible. Thank you for your interest.

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