What is a Forward Contract, what are the benefits and how do I set one up?
Forwards enable you to reduce uncertainty and mitigate currency risk by securing a fixed exchange rate for delivery in the future. They give you the freedom to take advantage of exchange rates in times that make sense for you, without having to pay for them until they are needed. This keeps your funds free for other uses and protects you from currency fluctuations.
Types of Forward Contract
Fixed Dated Forward
A Fixed Dated Forward enables you to buy or sell currency for settlement on a specific date in the future, at a pre-determind rate. Unlike a Spot Contract, a Fixed Forward eliminates the risk of a market fluctuation which is out of your favour, by locking in a favourable rate for a future transaction.
- Tailor delivery dates to suit your requirements
- Allows flexibility for early delivery or to extend the delivery date
- Eliminates pricing uncertainties by locking in a favourable rate
- Delivery dates up to 12 months in the future
A Window Forward is similar to a Fixed Dated Forward, but offers additional benefits by providing multiple settlements at a fixed rate, within the pretermined timeframe.
- You set the delivery window
- Allows for multiple deliveries
- The total amount of the contract can be settled in increments
- Single or multiple deliveries are set at a single exchange rate
Non-Deliverable Forward (NDF)
A NDF allows hedging in currencies where governement regulations retrict foreign access to local currency or the parties want to compensate for risk without a physical exchange of funds. NDF settle against a fixing rate at maturity, with the net amount in USD, or another fully convertible currency, either paid or received.
Contact our currency experts to discuss your requirements today.