What is a Forward Contract?

A forward contract is a transaction between two parties to buy and sell foreign currency for delivery at a date in the future. It is the most popular hedging tool for those who have a contract to deliver or receive an amount of currency in the future.

It is not to be confused with a “futures contract” which is an exchange-traded instrument with a fixed amount and set of delivery dates.

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Learn more about Currency Forward Contracts

As an importer or exporter, you will be used to issuing and receiving sales contracts that are denominated in a foreign currency ( i.e. a currency other than the one in which you operate your business on a daily basis).

It is no doubt also common for you to be asked to provide payment terms to your customers.

When you put these two factors together you come up with an exposure which can at least wipe out the profitability of an individual transaction but if a loss is significant, can threaten the very survival of your operation.

A forward contract is a simple, easy to follow transaction that allows you to hedge the exposure created by having to pay or receive a sum of foreign currency at a future date. By entering into a forward contract with currencyTransfer.com you will know with absolute certainty the rate of exchange that will be applied to the trade thus converting your payable or receivable into your local currency.

Even if your client wishes to pay you within a given period; say any date within a given month, you can hedge your exposure through CurrencyTransfer.com. We can provide a single rate of exchange applicable for delivery at any time during a pre-specified period.

Our experts can discuss the various hedging options available to you which can cover a single payment or a series of payments. We can work with you to create an entire hedging strategy which covers your entire foreign currency exposure across a range of currencies and tenors.