Setting a forward currency contract allows businesses to be certain of costs around an international payment when budgeting future expenses.
In turn this mitigates currency risk and protects the company’s bottom line profit. With outside factors affecting the currency market daily, fixing a contract eradicates the risk of volatility and allows you to devise a clear financial plan around your overseas payments while making sure your international suppliers are paid on time.
With the future exchange rate locked in it means the price of the contract cannot change for the given date. This means the rate can move resulting in a favourable gain for the client.