Forward Currency Exchange Transaction
What is a forward currency sale and purchase transaction?
A forward currency sale and purchase transaction is an agreement between the bank and the client to purchase or sell a certain amount of some currency at a fixed time in the future at the exchange rate established on the day of entering into the transaction.
Advantages of the forward currency exchange transaction:
- You will take precautions against the unfavourable change in exchange rates: if you fix your income now you will not have to worry about the change in the exchange rate;
- You will find it easier to plan your finances, you will always know how much money you have in your account and how much you will have at a certain time in the future;
- A forward currency exchange transaction can be made for as long as a twelve-month time period;
- Minimum sums of a transaction are not applied to a forward currency exchange transaction;
- There are no any additional charges.
When does it make sense to enter into a forward currency exchange transaction?
- You receive loans in the foreign currency and want to use them rationally when converting them into another currency.
- You buy securities in the foreign currency, and you want to insure the income received for them against devaluation, or if a favourable situation has formed - the currency for which you bought the securities went up in price - you want to derive more profit from your investments.
- You borrow in the foreign currency on foreign capital markets and you want to protect yourself against the currency becoming more expensive at the time of paying back the loan.
A forward currency exchange transaction protects you against an unfavourable change in the exchange rate; however, it deprives you of the possibility to make profit from favourable changes in the exchange rates.
| Do you need more information about forward currency exchange transactions? Make a call by phones +370 5 266 4657, +370 5 266 4623 in Vilnius or send an electronic query. |
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