Forward currency transaction

A forward currency transaction is a transaction where a rate of exchange is agreed today but delivery occurs on an agreed date in the future. The rate of exchange is known as the forward exchange rate. Forward exchange rates are mainly used as a way of creating greater certainty about what the actual cost of a transaction will be in the local currency of the business. The use of forward currency transactions is often referred to as “currency hedging”.

 

reference: Business Studies / Accounting. Accounts & Finance Glossary. Jim Riley BA(Hons) MBA FCA // tutor2u

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