What is a Forward Exchange Contract?

The exchange of currencies on a future date, at a rate agreed today.

Benefits

  • Provides a fixed, known rate; and with greater cash flow certainty for business planning purposes.

  • Assists you in pricing your transactions and services.

Considerations

  • The forward rate on your transaction may be worse than the prevailing spot rate at maturity.

  • You can't benefit from a favourable exchange rate movement during the term of your agreed FX transaction.

  • You have an obligation to transact at maturity and the cancellation of the contract may incur a cost or benefit to you..

Managing foreign exchange

Movements in foreign exchange rates can impact businesses differently, so it's important to have a strategy tailored to your specific needs.

Learn with NAB

Forward Exchange Contracts Tutorial

Learn more about how to manage foreign exchange risk with forwards.

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Helping you make sense of credit, foreign exchange, interest rates and commodity markets.

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