Forward is a currency exchange transaction according to which the parties agree to purchase-sell the referred currency amounts in the future based on the currency exchange rate agreed upon on the transaction date.
Advantages of forwards:
- Exchange rate is fixed on the transaction date;
- Prevention against a possible exchange rate downfall and related loss;
- Fixed rate allows for better finance management in the company;
- Accurate planning of cash flows;
- No additional taxes is rated for conclusion of transaction;
- Forwards can be made even for 12 months period.
Currency forwards provide a possibility to purchase or sell currency in advance. Thus it also prevents the risk of a negative currency rate fluctuation effect. In case of a relevant liability to pay in certain foreign currency in the future it is possible to make a transaction for purchase of a relevant amount already now. As it is impossible to make an exact guess whether a currency exchange rate goes up or down, it is always more useful for a customer to protect himself from a possible rate downfall and loss than expect the rate rise and related gain.
Forward transactions can be made in the following cases:
- Export;
- Import;
- Repayment of loans in foreign currency;
In order to make forward transactions please contact any branch of DNB bankas or the Treasury Department and apply for forward limits.
