If you have a need to fix a USD, dollar, currency exchange rate today, for a payment date at some future point, then you are likely to need a Forward Currency Contract.

• You may have agreed to buy a property for sale in Florida today, but the completion of the legal paperwork may be set for 2 month’s time
• You may be in business, and need to fix the price of ordered imports at today’s exchange rate. Especially, if you anticipate that the exchange rate may not be as much in your favour when you need to pay for the goods.
• You may work abroad and have a need to regularly transfer a sum of money, but you believe that the exchange rate is at it’s best today

As long as you believe that the exchange rate is good , and you have 10% of the full amount you want to buy, then a Forward Currency Contract could be the choice for you.

Here’s an example:

1. You agree to buy a property in Florida for 200,000 Dollars, usd, and you have your money currently in Pounds Sterling.
2. You are planning to have a 100,000 dollar mortgage, so you need to buy 100,000 dollars with pounds.
3. The exchange rate is at the best rate for selling pounds to buy dollars for a while.
4. In this example, the GBP:USD exchange rate is 1.68 to 1, then the property is costing you £119,047.

If the exchange rate changes to 1.54 by the time that you need to change the money, then the price of the property effectively goes up by £10,823 to £129,870.

As you will be changing half of that amount, you will need to find an extra £5411 on the completion date.

To avoid this, all you have to do is:

• Agree to buy $100,000 today, at a rate of 1.68, but send your currency dealer just 10% as a deposit.
• Pay the balance on the day that the contract ends, which can be set for over a year’s time.

The downside? Well, of course, the exchange rate may go the other way. But, you will at least have the comfort of knowing that the price of your property purchase is fixed.

FAQ: Can I have the money earlier than planned?

Yes, because your currency can create the currency exchange as a “Time Option Forward Currency Contract”. Provided you send the money to the currency broker, they will change it and send it to wherever you ask at any date before the final day of the contract.

To discuss how your currency dealer can help you with a Forward Currency Contract, please speak to Zoe on 0044 (0)1480 458400. www.fx-foreignexchange.com