Foreign Exchange

Products Description
Spot Quotations

  • An FX transaction is the simultaneous purchase and sale of one currency against another currency at an agreed price. Each party promises to pay the other a certain amount of currency on an agreed date called Value Date.
  • By convention, this value date is set for two business days after the transaction date, which will enable the two parties to effect payment on good time.
  • A transaction conducted on this basis is called Spot quotation, and it may either be a Direct Quotation or an Indirect Quotation.
Forwards and Swaps

  • All deals that have to be delivered over two business days from transaction date are considered as Forward or Outright contracts.
  • The forward rate is composed of the spot rate plus or minus the interest rate differential between two currencies that is expressed in points. These forward points are subject to move, upward or downward, according to the interest rate differential.
  • In addition to the flexibility of settling future payments, Forwards are more appropriate than spots, if a company has a strong directional view of expected movements in exchange rates. But certainty is rare and hedging entirely with forwards may leave a company locked into unfavorable exchange rates.

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