What are Forward Exchange Contracts?
A forward contract is a binding obligation to buy or sell a certain amount of foreign currency at a pre-agreed rate of exchange, on or before a certain date. Contract prices depend on the spot price of the currency pair, the forward premium or discount, amount, the expiry date and whether the customer requires an option period or a fixed date contract. A forward contract is the most common method of hedging against foreign exchange risk as it provides a guaranteed rate for exporters and importers. A forward contract is an obligation that must be honoured, even if the customer’s trade requirement changes over the life of the forward contract. A forward contract therefore prevents the customer from benefiting from any favourable movements in exchange rates between booking the contract and completing the underlying transaction. No charges are levied for the provision of forward exchange cover to our trade finance customers. Foreign Exchange Transactions: Common Customer transactions are i
