In an FX forward, the contracting parties agree on the rate used in a future FX trade, that is, the forward rate, the time of the trade, the currencies to be bought and sold and the amount of currency to be exchanged. The forward rate may be higher or lower than the prevailing FX rate, called the spot rate. The forward rate is based on the spot rate and the interest rate spread between the two currencies.
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The FX forward offers full protection against unfavourable FX movements. You will know the rate used in a future FX trade and the euro amount needed for or received from the trade in advance.
A forward will offer full protection against unfavourable FX movements, but on the other hand, you will not be able to benefit from favourable movements, either.
Executing hedges requires a customer relationship and a general agreement on derivatives with Luminor. Please contact our specialists for further information. We will be happy to help.