Confidence on exchange rates
Are you due to receive a sum in foreign currency in a few weeks or months? Or do you need to settle an invoice in a few weeks or months in a foreign currency? A forward contract gives you confidence on the exchange rate. A forward contract is nothing more than agreeing to buy or sell a certain amount of foreign currency at a given date in the future. With a forward contract, you fix the exchange rate of an amount in foreign currency. And that means you know in advance how much you will pay or receive.