forward exchange contract

Forward Currency Contract

An agreement between two parties to exchange two currencies at a given exchange rate at some point in the future, usually 30, 60, or 90 days hence. A forward currency contract mitigates foreign exchange risk for the parties and is most useful when both parties have operations or some other interest in a country using a given currency. Forward currency contracts are over-the-counter contracts.

Forward Foreign Exchange Rate

The agreed-upon exchange rate for a forward contract on a currency. When a forward contract is made, the parties agree to buy/sell the underlying currency at a certain point in the future at a certain exchange rate. The rate is negotiated directly between the parties, unlike a futures contract, which trades on an exchange. Partly because there is little secondary market for forward contracts, determining the forward foreign exchange rate is a zero-sum game: one party will gain on the contract and one will lose, depending on the movements of the relevant currencies between the formation of the contract and its maturity.

forward exchange contract

a contract to exchange a given amount of one foreign currency for another at a specified future date (usually one or three months ahead). For example, if a UK importer is due to pay $100,000 for materials in three months' time, then in order to guarantee the pound cost of these materials it might cover the transaction by entering into a forward exchange contract to buy $100,000 for delivery in three months' time in return for a given amount of pounds, the amount of pounds being determined by the forward exchange rate. See FORWARD MARKET.
References in periodicals archive ?
Thus, table 2 below depicts the differences and similarities of forward exchange contract and Islamic FX forward which is also known as Promisory forward exchange contract.
Ordinary profit decreased 42 percent year-on-year to 52.1 billion yen, reflecting forward exchange contract gains.
Enter into a foreign currency forward exchange contract, designating the transaction as a fair value (asset exposure) hedge.
To insure against this happening, the firm can, at the time it receives the order, take out a forward exchange contract.
* Currency Risk -- traditional solutions such as forward foreign exchange and 24-Hour Market Watch, to more innovative solutions such as the bank's new flexible forwards (providing clients with the security of a Forward Exchange Contract and the flexibility of a Currency Option);
Most firms grossly overestimate the cost of hedging their foreign exchange exposure; the effective comparison is between today's forward exchange rate and the estimate of the spot exchange rate on the date the forward exchange contract matures, for an extended series of transactions.
It could do this by entering into a forward exchange contract (an agreement to exchange different currencies at a specified future date and at a specified rate of exchange) with its bank on January 1 to sell 1 million [pounds] on May 1.
On exchange rate volatility, he said: Trumpf's standard policy is to have forward exchange contracts. We have increased our hedging for 2019 to increase protection from extreme and adverse movements throughout the year.'
Though we have shown that it is impossible for FUH to hold true for both buyers and sellers of forward exchange contracts, a natural question arises: do forward exchange rates contain any information about corresponding future spot rates?
Cash flows used for investing activities were approximately $124 million, a decrease of approximately $37 million versus the prior year, primarily driven by changes in foreign currency forward exchange contracts. Cash flows used for financing activities and other were approximately $210 million, compared to approximately $269 million in the prior year.
The company is a closed-end diversified management investment company which intends to invest all of its assets in fixed income securities such as corporate bonds, asset-backed securities, sovereign, variable rate senior loan interests; short-term investments, foreign currency forward exchange contracts, futures contracts, credit default swap agreements and interest rate swap agreements.
Roman has now switched its full business banking to HSBC's Tyne Tees Commercial team and a forward exchange contracts facility has been put in place, which helps protect the company against adverse movements in exchange rates.

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