FX Forward2

FX Forward

Reduce and better manage foreign exchange risk

Cross-border enterprises and e-commerce businesses can reduce and better manage foreign exchange risks via utilising professional forward foreign exchange services offered by KVB, which allow them to lock in the forward exchange rate before they pay their global suppliers.

* Customers who wish to deal FXForward transaction with KVB must provide international traderelated purchase orders and tradeinvoices on the booking date. Thisservice will be provided by KVBTrading (Hong Kong) Limited.

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What is a FX Forward Contract?

A foreign exchange (FX) forward contract is a contractual agreement between a corporate client and KVB, where we agree to buy or sell a currency at a predetermined exchange rate on a specified future date, unaffected by the prevailing market rates on that day. Forward transactions can help clients hedge against future foreign exchange risks.

Increase Risk Mitigation Capability
Under volatile FX market situations, company profits would be significantly affected. By locking in a forward exchange rate, businesses can limit the influence of short-term market instability on profit and cost, facilitating the achievement of long-term business goals.

Enhance Cash Flow Management
Having FX Forward brings corporates more certainty regarding future income and expenses, thus improving foreseeable cash flow and enabling better cash flow management.

Flexible FX Forward Transaction
Our FX Forward supports multiple currency exchanges and can be customized to suit your business needs. With over 25 years of experience serving clients globally, KVB has extensive expertise in foreign exchange and can tailor a suitable FX forward plan for your company.

Minimize Transaction Cost
‍Specifying a particular exchange rate for forward execution helps with income and expense forecasting and prevents frequent trading that incurs extra transaction costs. Small and medium-sized enterprises can also benefit from preferential bank VIP-level rates provided by KVB.

How Do FX Forward Contracts Work?

Our major client, an international wine agent in China, is the exclusive distributor of a renowned vineyard. Every quarter, they need to purchase a 20-foot container of high-end French wines, with a total value of 1 million pounds. They need to convert their company's holdings of US dollars into pounds through the international exchange process to pay to the vineyard one month later.

Collaboration Solution
At that time, the wine agent signed a one-month foreign exchange forward contract with KVB and deposited a small amount as a down payment to lock in the forward exchange rate.

Results of Collaboration
On July 1st, the client utilized KVB's FX Forward Contract and locked in a rate of 1.2087 pounds to US dollars for one month later. On the payment date, July 31st, even though the exchange rate had increased to 1.2152, the client was still able to settle based on the agreed forward rate. If the client had not entered into a FX forward contract, they would had to pay an additional $6,476 to buy one million pounds.

Sell Currency

USD

Buy Currency

GBP

Trade Date

1st Jul, 20xx

Maturity Date

31st Jul, 20xx

Tenor

1 Month

Execution Date Spot Rate

GBP/USD 1.2152

Forward Rate

GBP/USD 1.2087

Customer Sell Amount

USD 1,208,724

Customer Buy Amount

GBP 1,000,000