Good Money Guide Home > Compare Currency Forwards

Currency forwards let you buy foreign currency at a set rate decided before the date you make the purchase. This means you can lock in a rate and make a profit on the transaction if the price of the currency pair moves in your favour. Compare currency forward rates to get the best deal on your currency contract.

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TorFX

Personal Transfers: ✔️
Business Transfers: ✔️
Currency Forwards: ✔️
Currency Options: ❌
Personal Service: ✔️
Phone Dealing: ✔️
Online Platform: ✔️
Total Currencies: 40
Min Transfer: £100
Max Transfer: None
Customers: 325,000
Founded: 2004
Transfers: £7.5 billion a year
HQ: Cornwall, UK
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Currencies Direct

Personal Transfers: ✔️
Business Transfers: ✔️
Currency Forwards: ✔️
Currency Options: ❌
Personal Service: ✔️
Phone Dealing: ✔️
Online Platform: ✔️
Total Currencies: 40
Min Transfer: £100
Max Transfer: None
Customers: 325,000
Founded: 1996
Transfers: £7.5 billion a year
HQ: London, UK
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OFX

Personal Transfers: ✔️
Business Transfers: ✔️
Currency Forwards: ✔️
Currency Options: ❌
Personal Service: ✔️
Phone Dealing: ✔️
Online Platform: ✔️
Total Currencies: 55
Min Transfer: £250
Max Transfer: None
Customers: +1 million
Founded: 1998
Transfers: £82 billion
HQ: Sydney, Australia
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Key Currency
Personal Transfers: ✔️
Business Transfers: ✔️
Currency Forwards: ✔️
Currency Options: ❌
Personal Service: ✔️
Phone Dealing: ✔️
Online Platform: ✔️
Total Currencies: 42
Min Transfer: £1,000
Max Transfer: None
Customers: 50,000+
Founded: 2015
Transfers: £2 billion a year
HQ: Cornwall, UK
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Global Reach

Personal Transfers: ✔️
Business Transfers: ✔️
Currency Forwards: ✔️
Currency Options: ✔️
Personal Service: ✔️
Phone Dealing: ✔️
Online Platform: ✔️
Total Currencies: 30+
Min Transfer: £3,000
Max Transfer: No limit
Customers: 30,000+
Founded: 2001
Transfers: £6 billion pa
HQ: London, UK
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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.

Here’s more about what currency forwards are and how they work.

How do Currency Forwards Work?

You convert money either online or over the phone as though it was a normal same day conversion. However, as the settlement date will be in the future the pricing will be slightly different. It may be in your favour or against you depending on the interest rates of the two currency countries.

So, for example if you want to lock in the current GBP EUR rates for a purchase of 100,000 Euros, you would buy 100,000 Euros, but instead of paying the GBP you only pay 5% as a deposit, then the balance when the trade settles, this could be any point up to a year in advance for most currency forward brokers.

The main advantages and disadvantages of currency forward contracts

Advantages of currency forward contracts

  • Reducing risk – protecting your budget from currency prices moving against you
  • Locking in profits – If you are budgeting you can use a currency forward to lock in profits on a foreign transaction or make sure that an upcoming foreign property purchase does not cost you more than the currency exchange rate.
  • Cost effective – currency forwards generally shouldn’t cost any more in (exchange rate) fees than a normal transaction. They are cheaper than buying a full amount of currency outright.
  • Flexibility – you can draw down early on a currency forward by reducing the position if you need some foreign currency early

Disadvantages of currency forward contracts

  • Loss of positive gains – If you buy currency forward contract early then you miss out on exchange rates potentially moving in your favour. Of course, no one can predict where a price may be in the future so with large foreign exchange transactions it is often prudent to err on the side of caution.
  • Deposit protection – currency brokers are not covered by the FSCS so if a currency broker defaults your deposit and position are not protected by UK regulators
  • Commitment – unlike futures and options currency forwards must be carried to settlement. You cannot close a currency forward before the settlement date without incurring significant costs.

Here’s how to prepare for a large currency transaction.

What to watch out for when using currency forwards

Live forward exchange rate quotes are not really available online, so the best thing to do it open an account with an online foreign exchange broker and request quotes using their online platform as and when you need them.

Sometimes a countries exchange rates can act in your favour and the more commission-hungry brokers will on occasion not offer this price improvement to customers, instead giving the actual spot price rather than the forward rate.

Where to get a currency forward quote

To find the best currency forward exchange rates you can compare currency forward quotes here

Get a currency forward quote from our panel of currency brokers they will provide you with a quote based on the currency exchange rate and your forward settlement date.

It is important to note that currency forward quotes will change as the underlying currency exchange rate moves and the individual interest rates associated with the currency pair’s country changes.

What are currency forwards used for?

Currency forwards are used for locking in the currency exchange rate for a currency conversion in the future. The most common reasons for doing this are:

  • Buying a property abroad
  • Locking in profits from an upcoming foreign property sale
  • Budgeting for foreign income
  • Budgeting for recurring international payments
  • Locking in an exchange rate for an upcoming foreign invoice

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.

Here are some currency hedging strategies for business.

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 to see 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 advise on currency forward pricing potential movements.

Can You Compare 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.

Video: Currency Forwards Pros and Cons

This interview was recorded on 13th August 2019 with Mark Phips from Linear International Payments

Currency Forward FAQs

How do you calculate forward points in currency?

Currency forward contract prices are based on the difference between the underlying interest rates of the currency pairs involved in the transaction and added or subtracted from the spot rate.

Can you close a currency forward contract early?

No, currency forward contracts have to be settled. However, you can open an existing position to net off the contract and effectively have two forward contracts running to the same settlement date, making you flat, which is the equivalent of closing a forward.

Can you sell a forward currency contract?

Yes, you can buy or sell a currency for a forward date.

What fees will you pay on a currency forward?

Currency forward contract fees are built into the exchange rate and marked up from where a currency broker buys or sells the currency forward.

Are currency forwards taxable?

You should discuss tax issues directly with your currency broker or financial advisor.

Can you trade currency forwards on all currencies?

You can trade currency forward contracts on most currencies. However, some currency brokers offer more currencies than others. Check our comparison tables to find a broker that offers the most currency pairs.

Currency Forwards Explained:

Our currency forwards guides explain everything you need to know about currency forwards.