Moving Forward On Foreign Exchange

Forward, outright, hedge…sounds like a bunch of jargon, right? Maybe. But, a little jargon is necessary and getting to know these industry terms can help you talk to your members about foreign exchange trading.


A Forward contract, also known as an Outright contract, is an agreement to exchange one currency for another at a future date.

To demonstrate how this process works, here is an example scenario:

On August 1, 2014 a member books a forward contract to sell USD $250,000 on value date December 31, 2014 at a locked in forward rate of 1.0945. Regardless of the spot rate on December 31, 2014 the member will sell the USD funds and consequently buy the CAD funds at the rate of 1.0945 valued at $273,625.00. If on December 31, 2014 CAD appreciated/strengthened against USD to 1.0850 and the forward contract hadn’t been utilized, the member would have only received CAD funds of $271,250.00.

Business owners who are buying and selling products in the U.S. require foreign exchange services such as Forward contracts. These are great tools to mitigate foreign exchange risk by locking in a competitive rate today for a future transaction.

Would your credit union like to add foreign exchange services to your menu of offerings? With our industry-leading foreign exchange services and experts, we can make that easy and profitable for your credit union. Find out how by contacting the Concentra FX team or 1-306-566-1747.

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