This is a contract entered between the bank and a customer to buy or sell foreign currency on a future date. The two parties agree on the future date when settlement will be done, the amount and the rate to be applied then.
- Eliminates effects of exchange rate movements during the period before settlement is done
- Provides certainty to the customer on the expected cash flow for amounts to be paid or received hence helping him in planning
- No extra charge on the transaction
- Available for various periods up to one year