Forward Currency Contracts for Businesses

Lock in an exchange rate today

A Forward Exchange Contract (FEC) or simply a 'forward' is a contract between UKForex and your business to buy one currency in exchange for another at a specified future time at a price agreed upon today. This is different to a spot contract, which is an agreement to buy or sell today. Put simply, it's an opportunity to 'buy now and pay later'.

Example of how a Forward Contract works

ABC Limited, an importer of French clothing, have a large order being delivered to London in 4 months time. ABC have agreed to pay €100,000 for the goods in 4 months' time. The current EUR/GBP exchange rate is 0.8330. ABC therefore expects to pay £83,300 for the clothing.

First Possibility - ABC Limited doesn't use a Forward Contract

4 months' pass and ABC Limited are about to pay for the French clothing. The current exchange rate has moved unfavourably for ABC, with EUR/ GBP now sitting at 0.8830. The clothing will now cost £88,300 - £5,000 more than ABC originally planned on paying.

Second possibility - ABC Limited uses a Forward Contract

4 months' pass and ABC Limited are ready to pay for the French clothing. The EUR/GBP exchange rate has changed to 0.8830 but that is irrelevant as ABC bought a forward contract right after they negotiated the price with the French distributor. The EUR/GBP rate was 0.8330 then.


 ABC save £5,000 by thinking ahead and booking in a forward contract with UKForex.

Benefits of using a forward contract

  • Manage your business cash flow
  • Budget effectively and provide confidence in your future accounts receivable
  • Focus on your business without worrying about daily FX movements

How is a forward contract calculated?

  • The forward rate is calculated by adjusting the current market rate (the spot rate) for "forward points", which take into account the difference in interest rates between the two currencies and the time to maturity. 
  • The forward points are based on a formula which is standard industry practice; this is not an extra margin charged by UKForex 

Minimum Forward Contract Amount with UKForex

UKForex sets a minimum contract amount of £20,000. Most customers won’t see the full benefit of a forward if they send less than £20,000.

When does the money change hands?

You do not have to pay the full amount on the forward until the future maturity date. There is a small deposit required for a forward transaction and/or at a later stage prior to the maturity date. This holding deposit can run between 5%-15% depending on the volatility of the market.

What Currencies can you use with Forwards

UKForex is able to offer forwards on the following currencies:

 - Euros DKK- Danish Krone SEK - Swedish Krona
C$ - Canadian Dollar ¥ - Japanese Yen S$ - Singapore Dollar
£ - British Pound Sterling HK$ - Hong Kong Dollar د.إ - United Arab Emirates Dirham
zł - Polish Zloty NOK - Norwegian Krone R - South African Rand
CHF - Swiss Frank NZ$ - New Zealand Dollar

If you would like a quote for a forward exchange rate or want to know more about forward rates please call one of our dealers.

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