Currency Forward Contracts
Fix the rate on a known foreign payment before it moves against you.
A currency forward fixes today’s exchange rate for settlement on a set future date. It turns a moving cost or receipt into a number you can bank on.
Say you are a UK exporter expecting a €750,000 receipt in four months. Until you convert it, that figure is fixed in euros, not in pounds. A one-cent move in the rate shifts what lands in your account by about £7,500.
A forward lets you lock the sterling value now. This page answers two things: whether a forward is the right tool for your exposure, and where you arrange one.
It is the home for how the forward rate and forward points are actually priced, whether the instrument fits, and where to book it. For whether to hedge at all and the wider toolset, read our currency hedging guide. Currency Expert compares providers and never holds your funds.
There is no charge to use Currency Expert. We may receive a fee from a provider if you become its customer.
The forward market, in numbers
What a currency forward commits you to, and which kind you are buying
The step-by-step mechanics sit on the sibling page. What matters on this one is what you cannot walk away from, and which instrument your currency allows.
The order of events, agree the rate, place a deposit, meet any margin call, then settle, is set out in our currency hedging guide. We will not repeat the steps. The point worth your attention is what the contract binds you to.
A binding contract, not a rate held in reserve
A forward is an over-the-counter agreement between you and the provider. It is not an exchange-traded product you can sell on, and it is not a rate you take or leave. It is a contract you honour whether the market moves your way or against you.
Fixing the rate and settling the payment are two separate moments. The gap between them is where the commitment lives. Once the forward is live, the obligation stands even if your underlying deal changes, and we would flag that as the part businesses miss.
Deliverable forward vs NDF: which one your currency actually allows
A deliverable forward actually delivers the currency. It sits outside the MiFID investment rules under the “means of payment” exclusion, and it is what a business paying for or receiving goods wants. For a freely traded currency such as the euro, this is what you should be getting.
A non-deliverable forward, or NDF, is cash-settled against a reference rate and never delivers the currency. It exists because some currencies are restricted, for example the Indian rupee, Brazilian real, Korean won or Taiwan dollar.
So if you pay or receive in one of those, a provider may quote you an NDF by necessity. The job is knowing which situation you are in: a deliverable payment, or a differently-regulated, cash-settled instrument that only nets the difference.
How the forward rate is set, and why it is not a forecast
A forward priced below spot is not the market predicting a fall. It is carry, plus the provider’s own margin on top.
Why a forward quote differs from spot: carry from the swap market, not a bet on direction
You ask for a four-month forward and the quote comes back below today’s spot. It is tempting to read that gap as the market saying your currency will weaken. It is not. That difference is the forward points, and forward points are carry.
Carry is the price of the interest-rate gap between the two currencies. The currency with the lower money-market interest rate trades at a forward premium; the higher-rate one trades at a forward discount. No view on direction is involved.
One precise point that a dealer knows and the brochures blur: forward points are not taken from central-bank policy rates such as Bank Rate or the ECB deposit rate. They are priced off the interbank money-market and FX-swap rates for each currency, which drift away from the policy rate.
So if a policy-rate gap is quoted to explain a forward, treat it as rough direction only, enough to say which currency is at a premium and which at a discount. The live points come from the swap market. Any figure worked from policy rates is a simplified illustration, not a quote.
The margin the provider adds on top is the bit you actually pay
Forward points are the theoretical carry adjustment. They are not the cost of the deal. The cost you pay is the provider’s own FX margin, added on top of the carry-adjusted rate.
On our illustrative €750,000 receipt, a carry adjustment might move the rate by around £2,600 against you, arithmetic fixed by the interest-rate gap. A 0.5% provider margin on the same amount is about £3,200.
The carry is not negotiable; the margin is. It is the number we compare against a mid-market forward reference, so that is the number you should ask each provider for.
Do not let a provider present the carry adjustment as the whole cost. Ask for the margin over the mid-market forward, in pounds, and compare that figure across quotes. Our forward contract calculator works that margin out for you from any quote.
Fixed and flexible forwards: matching the contract to the date
The sibling names the types. We develop the distinction that changes the decision when your date is not firm.
Fixed (closed) forward: one settlement date
A fixed forward, sometimes called a closed forward, settles on one exact date. You take the currency on that day, at the rate you agreed. It suits a payment with a firm date, such as a scheduled loan repayment or a completion you can rely on.
Flexible (window) forward: draw down across a period, at a price
A flexible forward, also called a window or open forward, lets you draw down the currency across a period rather than on a single day. You can settle in stages as invoices fall due, which suits an uncertain completion or staged payments.
The flexibility is not free. A window forward is usually priced off the least favourable point in the window, using the far date’s forward points and the same carry arithmetic as above. If your date is genuinely firm, you pay for flexibility you do not need.
A worked example: fixing a euro receipt on the sell side.
Illustrative rates, not a live quote. It shows the carry and the margin as separate real costs, and the upside you give up.
Worked example
Start at the illustrative spot of 0.8500, so €750,000 is worth about £637,500 today. Sterling money-market rates sit a little above euro rates in this illustration, so the euro is at a small forward discount and selling it forward yields slightly fewer pounds.
The forward points, roughly -0.0035, take the carry off first. That is about £2,600 less than the spot-implied figure, giving around £634,900 before the provider is paid.
Then the provider margin, an illustrative 0.5%, comes off inside the rate: about £3,200. That leaves roughly £631,700 locked in. The margin, not the carry, is the bit you actually pay and the bit to compare.
You also post an initial deposit, an illustrative 5% of the contract, about £31,900, held until settlement. It is not a fee, but it is cash tied up.
Now the give-up. If the euro strengthens to 0.8800 by settlement, an unhedged receipt would have been worth about £660,000. You locked £631,700, so you forgo roughly £28,300. That is the price of certainty, and you should see it before you book.
The variation margin call is a cash-flow event, not a fee
A live forward can demand more cash at short notice, purely because the market moved.
The initial deposit is only the start. Once your forward is live, a market move against your position can trigger a mark-to-market variation-margin call, even though nothing about your underlying deal has changed.
The notice to fund it is short, often a business day or two, and the cash may be needed well before settlement. It is the boring detail that turns out to be the expensive one: a cash-flow calendar problem, not a charge.
Before you book, ask what triggers a call and how long you get to meet it. If you cannot fund one, the provider can close the contract and invoice you for the shortfall. We would keep cash headroom against exactly this.
What happens if the order slips, shrinks or falls through
Here the underlying deal itself changes, not the market. The contract stands even when the deal does not.
Roll the contract to a later date with an FX swap
If your supplier slips the shipment, you can roll the forward to a later date. The provider does this with an FX swap: it closes the near date at spot and opens a new far date. You settle the difference in cash, and the roll is priced by the same carry arithmetic.
Draw down early or pre-deliver
If the payment falls due earlier than planned, you can draw down early, sometimes called pre-delivery. The provider brings the value date forward and adjusts for the change in forward points, so your effective rate shifts slightly for the shorter period.
Close out and settle the difference in cash
If the deal dies, the forward does not. You can close it out voluntarily: the provider runs an offsetting trade at the current rate, and if the market has moved against you, you settle the difference. That cost comes off your deposit, and any excess is invoiced.
The real trap is over-hedging. If the invoice value drops, you are left committed to buying currency you no longer need, which is a speculative position rather than a hedge. This voluntary close-out is a different event from the forced close-out that follows a missed margin call.
Read this before you book
How your money is protected while the forward is live.
The generic point, that safeguarding is not FSCS cover and the £120,000 limit does not reach money held with an FX provider, is set out in our currency hedging guide. The forward-specific point is harder, and worth your attention.
A live forward creates distinct pools of your money: the initial margin, any variation margin already posted, and the proceeds of a contract awaiting delivery. They are not necessarily treated the same way.
Margin posted as collateral against the provider’s exposure may sit outside safeguarded client money altogether, while proceeds awaiting onward delivery are usually safeguarded. Do not assume all of it is protected. Ask the provider to show, in writing, how each balance is treated.
Is a forward the right tool for your exposure?
A straight view, not a neutral list.
A forward fits a known amount on a reasonably firm date, where a rate move would eat a real margin. If that describes your exposure, we would use one and not overthink it.
Where the amount or date is genuinely uncertain, we would think harder. A flexible forward covers a moving date. An option, which is a premium paid for the right but not the obligation, keeps your upside for a cost. Leaving part of the exposure open is sometimes the honest answer.
The trade-off is flat: a forward removes the downside and the upside together. For the fuller treatment of options, natural hedging and staged buying, read our currency hedging guide. This page is about the forward itself.
Where to arrange a currency forward, and what you need to qualify
Verified from provider terms on 14 July 2026. Terms change; confirm directly before booking.
You are asking for a credit line: the assessment that sets your tenor and deposit
Booking a forward means the provider extends you a credit line and carries counterparty risk on you until settlement. So you typically pass a credit assessment, and may be asked for financials before you can book.
Your covenant strength then sets the terms: how far out you can book, your total forward-cover limit, and whether you post a larger deposit or earn a no-deposit facility. A thin balance sheet rarely means no forward, but we usually see a shorter tenor and more cash upfront.
Providers that offer forwards to UK business, compared
| Provider | Typical initial deposit | Margin-call basis | Minimum contract size | Maximum tenor |
|---|---|---|---|---|
| Corpay | Around 5% | Not published; confirm directly | Not published; confirm directly | Up to 24 months |
| Currencies Direct | Around 10% | Not published; confirm directly | About £20,000 | Up to 24 months (business) |
| Ebury | Set under dynamic credit; not published as a fixed rate | Dynamic credit conditions, calculated across pooled positions | Not published; confirm directly | Up to 8 years |
| WorldFirst | 5% to 10% | Top-up within one business day when the position moves beyond the deposit | Not published; confirm directly | Up to 24 months |
| moneycorp | Not published; confirm directly | Not published; confirm directly | Not published; confirm directly | Up to 24 months |
| Convera | Up to 10%; no-deposit facility for strong credit | Not published; confirm directly | Not published; confirm directly | Up to 12+ months, varying by currency pair |
Questions to put to the provider before you book
Take these to the booking call. If a provider cannot answer them plainly, do not book yet.
- 01
What triggers a variation-margin call, and how long do you get to meet it.
- 02
What is the close-out basis if your underlying deal dies.
- 03
What does it cost to roll or extend the contract with an FX swap.
- 04
What is the minimum contract size and the maximum tenor you qualify for.
- 05
How is the initial deposit applied at settlement, and is any held back.
- 06
Is this a deliverable forward or an NDF for the currency you are dealing in.
- 07
How is each money balance safeguarded, margin and proceeds treated separately, in writing.
Common questions
Does a forward tie up cash beyond the deposit? +
It can. Beyond the initial deposit, a market move against your position can trigger a variation-margin call for more cash at short notice. On a large contract that top-up can run to tens of thousands of pounds, needed before you have settled anything.
What is the practical cost difference between a deliverable forward and an NDF? +
A deliverable forward hands you the currency to make the payment. An NDF only nets the difference in cash, so you still buy the currency separately on the day, at whatever the spot rate and margin then are. For a straightforward payment, the deliverable version is simpler and usually cheaper.
Can a start-up or a company with thin accounts get a forward? +
Sometimes, but the terms tighten. Because a forward is a credit line, weak accounts often mean a shorter maximum tenor and a larger deposit, or a decline. If you are declined, the usual fallbacks are prepaying the currency or buying at spot nearer the date.
What does a large interest-rate gap between the two currencies do to my forward rate? +
It widens the forward points. The wider the gap, the further the forward sits from spot: the lower-rate currency at a premium, the higher-rate one at a discount. A large gap does not predict a move; it just makes the carry adjustment bigger in pounds.
Is a forward the same as a bet on the currency? +
No, as long as it matches a real exposure. A forward against a genuine invoice fixes a cost you already carry. It only becomes a speculative position if you over-hedge and commit to currency you no longer need.
Compare live forward quotes for your exposure.
Tell us the currency, the amount, the date, and whether that date is firm. We will compare live forward quotes from specialist providers against the same mid-market forward reference, and be straight about the trade-offs. No cost, no obligation.
For how we compare a provider’s rate and fee against the live mid-market, see how we compare providers.