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Currency forward
Currency Forward is intended for:
Individuals as well as legal entities including municipalities, nationals as well foreigners, requesting hedging of the foreign currency risk resulting from a possible - from the client's point of view - negative development of the given currency pair.
Characteristics of Currency Forward:
Currency forward is a purchase or a sale of one currency for another currency in the rate agreed in advance between involved parties. Deal is settled with the forward value date (thus longer than 2 business days).
Currency forward can be concluded in all currencies listed on the table of exchanges of Komerční banka, a.s.
Currency forward can be concluded in the combination with foreign payment outward, documentary collection or documentary credit.
The deal is always concluded with the Sales dealer by phone.
The client receives deal confirmation containing the agreed parameters of the deal.
Risks
The potential for a profit or a loss from deals denominated in a foreign currency is influenced by the movement of foreign exchange rates.
Theoretically, the profit/loss is unlimited.
Risks, example:
A client concluded the currency forward with the bank.
The client sells EUR 1 mil., buys CZK, the settlement date is in one-month's time.
The agreed FX rate is 27.950.
On the settlement date, the actual spot rate is 28.000.
If the deal was concluded for the speculative purposes, the client suffered a loss of CZK 50,000 by its conclusion.
If the deal was concluded for the hedging purposes, the client considers this loss as a cost of hedging. The hedging protects the client against such a significant change of the FX rate that could cause him/her serious financial problems.
Benefits of Currency Forward:
- individually agreed exchange rate
- no fee for conversion
- securing of exchange rate (FX) risk
- arrangement of the deal over the phone
Currency Forward allows you to:
- secure your currency risk
- gain the requisite currency as of the date of the forward exchange
How can you obtain a Currency Forward?
If you are interested in gaining more information about this product or would like to arrange it directly, visit any branch of KB or call free of charge on the KB Info line 800 111 055.
