Fix your rate to protect against market moves with a Forward Contract
Create currency confidence and stay ahead of market moves
- Forward Contracts, a hedging tool, can help protect against a future change in price
- Lock in a rate for an agreed amount anytime between two days to 12 months
- Make or receive payments without blowing your budget due to rate movements
- Fix all, or even a portion of your known FX costs for the year ahead
- Make fixed-rate transfers earlier than the contracted date if needed
- Lock in rates between 19 currencies, including all majors
If you book a Forward Contract, it may mean losing out if the market rate improves because you’re contracted to settle at the agreed rate. Read more. Forward Contracts are not available for clients in New Zealand or personal clients in Hong Kong.
Talk to an OFXpert. You’ll feel currency confident in no time.
Need certainty over global business transactions?
Periods of high currency volatility can expose your business to increased costs or decreased revenues, putting a squeeze on your margins. If you have international invoices on the horizon, talk to an OFXpert about managing your foreign exchange exposure today.
Finalising a big overseas purchase?
Investments like property are a big commitment. Talk to an OFXpert about how you can fix a rate on finalised purchases or sales to get better clarity on your finances.
All Forward Contracts are subject to approval by OFX. Conditions vary per market.
You might consider a Forward Contract if you’re committed to making a payment for goods or services in the next few months – like paying suppliers or your mortgage for your property abroad. You need to be sure that the goods or services are definitely going to be delivered by the supplier because you can’t cancel a Forward Contract. You can also use a Forward Contract if you have an incoming payment, but you need to be certain that the payment will be made.
To continue to take advantage of exchange rate movements, some customers use a Forward Contract for only part of their liability as a way to partially hedge against volatility.
The exchange rate you’ll receive takes into account the market rate on the day you book your Forward Contract, a margin charged by OFX, and the central bank interest rates for the currencies you are exchanging.
You may be asked to pay an advance payment at the time of booking a Forward Contract, and/or during the life of the Forward Contract (a ‘margin call’). No interest is paid on advance payments.
Your advance payment is held as security for your completion of the contract until the maturity date. The advance payment is calculated as a percentage of the notional mark-to-market exposure of your Forward Contract. Mark-to-market exposure is the difference between your contracted rate and the current rate.
Businesses may apply for a credit limit which means your notional mark-to-market exposure may exceed the value of your Forward Contract up to the specified limit. If granted, we will only require an advanced payment to be posted once the specified limit is exceeded.
You have the option of early delivery at any point during the contract’s lifetime. For example, if you have bought €50,000 for use in 12 months, in 3 months’ time you could decide to make a payment using €10,000. When your Forward Contract matures you will need to settle the remaining amount. If you choose to deliver earlier than your agreed maturity date, the exchange rate may differ to your original contract.
If you want to close a Forward Contract, talk to your OFXpert as soon as possible. When we close an FX transaction, we buy back the currency that we have bought when you entered into the FX transaction at prevailing market rates. If the value of the currency you have asked us to exchange has strengthened, a loss will be incurred on the FX transaction and you will be liable to pay us the amount of that loss, together with any reasonable expenses or other costs we incur as a result.
Forward contracts typically start at US$10,000 but lower amounts may be considered.
Get peace of mind on future payments
From recurring payments like mortgage payments and tuition fees, to one-off bills, a Forward Contract could help you avoid the uncertainty of moving market rates.
Here to help you feel currency confident
Want to know more? Speak to an OFXpert about how a proactive approach to your global payments could make a difference to your bottom line.
More cash flow certainty
Jonathan Allara, Co-Founder Bicycles Online
Protection with flexibility
Allan Handley, Finance Director, Whisper Films
Other articles that may interest you
Click here to see all blogs