Currency Forward Contracts

What is a forward contract?

A forward contract is a hedging product that allows you to secure an exchange rate over a set period of time on a predetermined volume of currency.

With WorldFirst, a forward contract can be entered to facilitate payments for identifiable goods or services.

You will be able to lock in an exchange rate for up to 24 months.

Why hedge using a forward contract?

Locking in an exchange rate with a forward contract means you know exactly what exchange rate you’re getting, for a set time. This helps you predict cash flow so you can be smarter, more accurate and more competitive with your forward planning.

What can happen if I don't hedge?

Without locking in a fixed rate (hedging), adverse market fluctuations could lead to losses for your business and result in increased prices for your products and services.

Five things to consider when hedging

During a forward contract, if the market rates move against you, you won’t lose out because your rate is secured. However, if rates move significantly against you, you may need to pay a margin call.
You won’t benefit if a currency moves in your favour during your forward contract, though you may be able to take advantage of market movement with a spot contract.
You must consider your risk appetite and evaluate your budget when pre-booking foreign currency. It may be worthwhile considering other strategies if you are unsure of your requirements.
You can enter a forward contract exchange with WorldFirst in order to pay an upcoming invoice in a foreign currency, or in preparation of an upcoming purchase in a foreign currency, but would not be able to trade forwards for speculative purposes.
There is an initial deposit requirement associated with forward contracts, usually from 5 to 10 percent depending on the length of your contract. Please reach out to your relationship manager who can look to see whether you are eligible for a credit facility to help cover this.
In New Zealand Forward Contracts are only available to wholesale customers. Your dedicated account manager can provide more information on which businesses are eligible and how to get started.

How to book a forward contract

Once you have signed up for an International Payments Account, you can find out more about what you need, from hedging strategies to currencies involved and length and rate of contracts by calling one of our relationship managers on +61 2 8298 4999.

Your relationship manager will clearly cover the below terms to ensure you are comfortable with the conditions of the forward.

These terms include:

The currencies involved
Rate of the contract
Tenure (length) of the contract
Explaining deposit/initial margin requirements, in case a credit facility is appropriate to help cover initial margin requirements
Understanding if you will be using this (forward bought) currency in relation to the sale or purchase of goods or services, or for direct investment

You can easily book fixed forward contracts online and window and flexible forward contracts by calling +61 2 8298 4999 and speaking to one of our relationship managers.

If you request a rate further than a spot contract (trade date, plus two days), you will receive a pop-up on your account informing you that you are about to book a fixed forward contract with WorldFirst and that a deposit may be required.

Once you click "Accept Rate & Book Transaction" you will enter a legal contract with WorldFirst to buy or sell the currency you have selected.

For added transparency, you will also receive detailed information on how we calculate margin requests. This information is important in case your rate significantly moves during the tenure of your contract, thus requiring a margin call.

To get started, log in to your account.

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Fix your rate and future proof your plans with a forward contract from WorldFirst