Manage your foreign exchange exposure with forward contracts
What is a forward contract?
A foreign exchange (FX) forward contract is an FX product that allows you to secure an exchange rate for a future date on a predetermined volume of currency.
Businesses typically use forward contracts to secure exchange rates for their known future international payment needs.
With WorldFirst, you can enter into an FX forwards contract to support your business activities and facilitate the ability for you to make payments for goods and services.
You will be able to lock in an exchange rate for up to 12 months.
Benefits of booking a forward contract
Locking in an exchange rate with a forwards contract means you know exactly what exchange rate you’re getting, for a set time. This helps you predict your cash flow so you can be more prepared, more accurate and more competitive with your planning.
Four questions to consider before booking a forward contract
1. Will market rates move drastically?
Exchange rates can be volatile. With a forward contract, you will have secured a predetermined exchange rate for your future payments. This mitigates your financial exposure to currency fluctuations for those future payments.
2. What is your risk appetite?
You must consider your cash flows and budgets when booking a forward contract. An FX forward contract is a committed contract to deliver a foreign currency payment at a predetermined rate. It may be worthwhile considering other strategies if you are unsure of your requirements.
3. What is your purpose for using forward contracts?
You could enter into an FX forward contract with WorldFirst in order to pay an upcoming invoice in a foreign currency, or in preparation of an upcoming purchase in a foreign currency. However, you would not be able to trade forwards for speculative, personal, family or household purposes, or for any purposes related to the business activities of a third party.
4. Do you have other obligations?
There is an initial 5% deposit requirement called a margin, to be paid upfront to secure your obligations under the forward contract. This amount will be associated with the notional amount of your forward contract.
How to book a forward contract
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