The exchange rates governing some specific future date foreign exchange transactions are called Forward exchange rates.
When two parties decide to exchange currencies and carry out the transaction at a certain future date, the transaction is known as a forward exchange. These future transaction exchange rates are known as forward exchange rates.
One kind of forward price is the forward exchange rate. It is the exchange rate that is agreed upon today, as part of a forward contract, between a bank and a client to buy or sell a certain quantity of foreign currency in the future. By employing a forward contract to lock in a forward exchange rate, multinational firms and financial institutions frequently use the forward market to protect future payables or receivables denominated in a foreign currency against foreign exchange risk. While futures contracts are utilized for smaller transactions, forward contracts are often used for larger transactions.
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