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FOREIGN EXCHANGE FORWARD TRANSACTION

Definition

Definition Foreign Exchange Forward Transaction refers to the transaction of foreign exchange settled on the agreed date (a date after the second working day upon the conclusion of transaction) and as per the agreed exchange rate by both parties. A Foreign Exchange Forward Transaction can usually last for one year. A transaction in excess of one year is called as a super-forward transaction of foreign exchange.

Functions

Foreign Exchange Forward Transaction is a commonly-used method to mitigate the foreign exchange risks and fix foreign exchange costs. Generally speaking, the foreign currency-denominated transactions, such as settlement in foreign trade, investment abroad, application for foreign exchange loans or paying back the loans in foreign currencies, are all involved value maintenance of foreign exchanges. By doing Foreign Exchange Forward Transaction, the customer can fix in advance the foreign exchange costs, either paying or receiving in foreign currency; in order to achieve the goal of maintaining the value and can further enable the enterprise to focus the resources on its own operation.

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