This means that future movements in currency rates are offset, for example, by buying currency forward
at a favourable rate today in the expectation that currency shifts will be worse by the time you need to make payments in that currency.
Financial markets feel that weaknesses and relative vulnerabilities of GCC economies today need to be reflected in price performance, and since the market cannot express this weakness in the spot market, it has taken it to the currency forward
market to try to express these vulnerabilities.
This is particularly relevant during periods of extreme market conditions, when execution generally becomes less efficient and execution risk in the FX market remains relatively low particularly for G10 currency forward
However, the recent sharp decline of oil prices has fuelled speculation in the currency forward
markets about possible devaluation of GCC currencies, QNB said.
As a result, income before foreign currency forward
contracts (gains)/losses, finance and income tax expenses of CAN 7.
Attempts to hedge by entering into a new currency forward
at the beginning of each period would provide a limited hedge.
Foreign Currency Forward
Contracts for Forecasted FX Transactions
For certain foreign currency derivatives, such as a foreign currency forward
However, Chris Bradshaw of Attraction Tickets Direct (ATD), says: ``All major opera-tors have bought currency forward
to plan programmes and prices for 2005, and their prices won't change much from now on.
Risk strategies: Monsanto handles market risk related to interest foreign currency rates and commodity prices by engaging in various derivative transactions, including foreign currency forward
exchange contracts and foreign currency options
Also, if you are sure of your transaction don't be afraid to buy currency forward
contracts (which lock in the price of a currency for settlement at a specified future date).