FX Forward

Agreement guaranteeing fixed exchange rate

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Agreement on fixed currency exchange rate on specific amount and date in the future

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  • Full Hedging
  • Future exchange rate guarantee.
  • Predictability of cash flows from foreign currency transactions due to the fixed future exchange rate.
  • Flexible expiration date - from week to 12 months
  • Zero cost
The client has 3-weeks payables of EUR 100,000, i.e. in three weeks time company will need to buy EUR. A possible RSD depreciation will raise the cost of the payables, as this means that the client has to buy EUR at a higher price. The “FX Forward” allows the client to fix the price that he/she will pay in three weeks time when the payables are due. This price is binding without the possibility of cancellation*. For instance if the agreement is signed on 18.05.2010 when current exchange rate is 101.50 RSD for 1 EUR, the Forward price for sale of Euros in a three weeks is fixed at 101.97 RSD for 1 EUR. The client that opts for the “FX Forward” solution completely eliminates any exchange rate risk on the maturity date.

On 08.06.2010, maturity date of FX Forward the exchange rate is 103.35 RSD for 1 EUR. That means that client benefits by Forward agreement 138.000 RSD since he needs 10.197.000 RSD only to buy EUR 100,000 while he would need RSD 10.335.000 for the same amount of EUR