If you want to lock in an exchange rate for up to a year in advance you can do it with a currency broker and FX forward contract.
Currency brokers offer exchange rates that are much better than banks and because they specialise in foreign exchange the process is much more user friendly. Most established currency brokers do not charge a commission or any fee for paying the money to an international beneficiary.
It is possible to save up to 4% on foreign exchange transactions by using a currency broker as opposed to your bank. Use our quote form to request quotes from multiple money transfer providers or see here for travel money.
You can also request quotes from all the brokers at the same time here. Fees relate to how far exchange rates are from the mid-market.
What are currency forwards?
With a currency forward you can lock in an exchange rate for up to a year in advance.
A currency forward is simply a way of buying currency now at the current exchange rate for a settlement date in the future. When you do the conversion you put down a small deposit, then pay the balance on the date you need the full amount. They are one of the most common ways to reduce and hedge currency exposure for businesses or protect against adverse exchange rates moves for overseas property purchases.
Watch our video on how currency forwards can be used and the pros and cons of doing currency forward contracts
This interview was recorded on 13th August 2019 with Mark Phips from Linear International Payments
Currency forward contracts for businesses
If your business is importing, exporting or exposed to foreign currency in any way, then using forward currency contracts to hedge and manage the risk of currency fluctuations is essential. Businesses can use forward contracts to lock in a current foreign exchange rate for overseas transactions. The key benefits for companies is that they are able to account accurately for international business in forecasts and budgets.
Currency forwards for individuals
Individuals can use forward contacts if they have an upcoming purchase and want to fix the current exchange rate. The process is very simple and can be done online in a few clicks. If for example you are buying a property abroad and have to make a final payment of EUR500,000 in three months time. But, you think the EURGBP rate will move against you over that period, you can use a currency forward to buy the EUR now, but not have to pay the GBP for another three months.
FX forward drawdowns & rollovers
Customers can drawdown funds on currency forwards before they are due to settle if they are required beforehand. Also, if customers require funds at a later date to settlement forward contracts can be rolled over ahead of settlement.
How does FX forward pricing work?
FX forward pricing is based on the interest rates of the prevailing countries in which the currency you want to trade are based. For more information on FX forward pricing request a FX forward price in the request a quote from any of the brokers listed in our currency forward broker comparison tables.
Where can I view currency forward rates online?
Once you have an account with a currency broker that offers forward contracts you can request live quotes and get currency forward quotes online 24 hours a day for up to a year in advance.
You can also check currency forward rates over the phone with experienced dealers who can also advice on currency forward pricing potential movements.
Can I see forward contract hedge examples?
We’ve put together a forward contract hedge example here. However, currency forward rates change all the time and depending on the underlying currencies with either be positive or negative to the market.
You may also be interested in these sections:
- What are currency forwards?
- Currency forward quotes
- FX forward pricing
- Currency forward rates
- Currency forward contract pricing formula
- Forward exchange contract advantages and disadvantages
- Forward exchange contract example
- Forward contract hedge example
- Advantages and disadvantages of future contracts
- Advantages and disadvantages of forward contracts and currency options
- Advantages and disadvantages of option contracts
- Advantages and disadvantages of money market hedge
- Business risks of forward contracts
- Advantages of futures and forwards
- What advantages do futures contracts have over forward contracts
- Currency hedging forward contracts