Okuzeka
International Trade vocabulary · Foreign Exchange

Forward contract

Meaning in international trade, with examples

nounCommon term

In international trade, forward contract means: An agreement with a bank to buy or sell a set amount of foreign currency on a future date at an exchange rate fixed today.

In Turkish: vadeli döviz sözleşmesi, forward sözleşmesi, forward

How it is used

The most common hedging tool for exporters and importers, often just called 'a forward'. The forward rate is not a forecast; it is calculated from the spot rate and the interest-rate difference between the two currencies.

Example sentences

  1. We signed a forward contract to sell EUR 500,000 in March at a fixed rate.

  2. The bank offered a three-month forward contract for our dollar payment.

Common collocations

  • enter into a forward contract
  • forward rate
  • three-month forward contract
  • close out a forward contract
  • hedgeTo reduce the risk of losing money from future price or exchange-rate changes, for example by fixing today the rate for a payment that will arrive later.
  • spot rateThe exchange rate for buying or selling a currency for immediate delivery, which for most currencies means settlement within two business days.
  • currency riskThe risk that a change in exchange rates will reduce the value of money you will receive, or raise the cost of money you will pay, in another currency.
  • exchange rateThe price of one currency expressed in another, for example how many Turkish lira you need to buy one euro.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Foreign Exchange

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