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Currency Forward

A product to secure currency risk.

A Currency Forward is intended for:

  • natural persons
  • corporate entities including municipalities
  • Czech nationals and foreigners
  • clients who demand security for exchange rate risk resulting from possible negative development for the client of a specific currency pair

Characteristics of a Currency Forward:

  • A Currency Forward  is the purchase or sale of one currency for another currency subject to a rate agreed in advance by the participating parties.
  • Settlement of the transaction takes place with a forward value date (i.e. longer than 2 working days from the date the transaction is agreed).
  • A Currency Forward can be arranged in all currencies stated in the Komerční banka exchange list.
  • Currency Forward can also be agreed in combination with an outgoing smooth payment, documentary collection or documentary letter of credit.

Risk

  • The potential for profit or loss from transactions denominated in foreign currency is influenced by the movement of foreign exchange rates.
  • Theoretically, neither profit nor loss is limited in any way.
Example of risk
  • A client concluded a currency forward with the bank.
  • The client sells EUR 1 mil., buys CZK, settlement of the transaction in 1 month.
  • The agreed FX rate is 27.950.
  • On the settlement date, the current spot rate is 28.000.
  • If the transaction was concluded as speculative, then the client suffered a loss of CZK 50,000 by concluding it.
  • If the transaction was concluded for hedging purposes, the client then understands this loss as the cost of hedging.
  • Hedging protects the client against such a significant change in interest rates, which would cause him or her serious financial problems.

Advantages of a Currency Forward concluded at Komerční banka

  • the Currency Forward can be arranged in all currencies stated on the Komerční banka exchange list
  • the Currency Forward can also be agreed in combination with an outgoing smooth payment, documentary collection or documentary letter of credit.
  • the transaction is always concluded by telephone with a Client transaction dealer
  • the client receives confirmation of the concluded transaction containing the agreed parameters of the transaction
  • at Komerční banka, a team of experienced professionals is at your disposal; they will propose an optimal strategy and are able to respond flexibly to developments on the market

A Currency Forward allows you to:

  • hedge against possible currency risk

How to get a Currency Forward?

  • contact your relationship manager
  • call the toll-free KB Info line on 800 521 521

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