Forward exchange transaction

Forward exchange transaction

Foreign currency purchase or sale at the current exchange rate but with payment or delivery of the foreign currency at a future date.

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.
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Overseas borrowings by banks for forward exchange transactions and increased trade financing by companies contributed to the increase in short-term liabilities.
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