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

Lock in an exchange rate that suits your business needs, protecting budgets from adverse currency fluctuations and helping to mitigate risk.
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, services or direct investment (making a capital investment in an enterprise to obtain a lasting interest in it).

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

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. There is an initial deposit requirement associated with forward contracts ranging from three to 10 per cent 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.

For more information download our free FX hedging guide below. 

How do forward contracts work at WorldFirst?

Forward contracts help protect SMEs against currency fluctuations without having to buy currency upfront on the spot market. The forward price is always based on the current spot price .

The spot price is the current market price at which a currency pair is bought or sold for immediate payment and delivery. We offer a fully transparent pricing model, which sets the forward contracts being offered apart in the marketplace.

Types of forward contracts

The main types of forward contracts WorldFirst offers are fixed, window and flexible forward contracts. These are outlined below:

Fixed forward contracts
Fixed forward contracts

Buy or sell an exchange on a determined notional amount for a particular value date in the future – known as the value date or maturity date.

Flexible forward contracts
Flexible forward contracts

Draw down funds in one go or make multiple payments over the tenure (course) of your contract, ensuring the total agreed amount is settled by the value date or maturity date.

Window forward contracts icon

Window forward contracts

Buy specific amounts of foreign currency within a range of settlement dates – known as windows – at predetermined rates. The windows can be used to offer more flexibility in securing currency rates than outright forward contracts.
How to book forward contract

How to book a forward contract

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