About FX Forward
A contract to sell or buy a currency against another foreign currency at an exchange rate and a predetermined amount at the time of the transaction, while the exchange of funds is made within the next> 2 business days after the transaction date.
Just like an FX Spot contract, when it is due, it is an obligation for the party making the transaction to exchange the funds.
The Forward Rate is calculated based on the Spot + Swap Point Exchange (difference in interest rates between the two currencies).
Just like an FX Spot contract, when it is due, it is an obligation for the party making the transaction to exchange the funds.
The Forward Rate is calculated based on the Spot + Swap Point Exchange (difference in interest rates between the two currencies).
Import Liability Hedging
Export Receipt Hedging
| Monday, Mar 7th 2018 | Tuesday, Mar 8th 2018 | Wednesday, Mar 9th 2018 |
|---|---|---|
| TODAY | SPOT |
1mFORWARD |
| =8,800 | =8,850 | |
| swap point = 50 |
||
| Customer A sold USD 100,000 @ 8,800 currency 1mForward |
Customer's USD account will be debited and IDR credited IDR 885mio |
Import Liability Hedging
Suppose there are importers from Indonesia who have an obligation to pay USD 1 million to overseas suppliers within 1 month from now and the prices given by Maybank are as follows:
In this case, because the importer is of the view that the USD will strengthen within the next 1 month, it is recommended that they hedge by purchasing a 1-month Forward FX contract at the rate of 8.860 (Maybank selling rate).
Upon maturity (1 month later), the IDR importer account will be debited at IDR 8.86 billion and the USD importer's account will be credited in the amount of USD 1 million.
| Selling Exchange Rate | ||
|---|---|---|
| USD / IDR Spot Rate: | 8,800 | 8,810 |
| 1 month Swap Point: | 40 | 50 |
| Forward Rate 1 month: | 8,840 | 8,860 |
In this case, because the importer is of the view that the USD will strengthen within the next 1 month, it is recommended that they hedge by purchasing a 1-month Forward FX contract at the rate of 8.860 (Maybank selling rate).
Upon maturity (1 month later), the IDR importer account will be debited at IDR 8.86 billion and the USD importer's account will be credited in the amount of USD 1 million.
Export Receipt Hedging
Suppose there are exporters from Indonesia who will receive a payment of USD 1 million from overseas buyers within 1 month from now and the prices given by Maybank are as follows:
In this case, because the exporter is of the view that the USD will weaken within the next 1 month, it is recommended that they hedge by selling a 1-month Forward FX contract at the rate of 8.840 (Maybank buying rate).
When due (1 month later), the USD exporter account will be debited at USD 1 million and the IDR exporter account will be credited at IDR 8.84 billion.
| Selling Exchange Rate | ||
|---|---|---|
| USD / IDR Spot Rate: | 8,800 | 8,810 |
| 1 month Swap Point: | 40 | 50 |
| Forward Rate 1 month: | 8,840 | 8,860 |
In this case, because the exporter is of the view that the USD will weaken within the next 1 month, it is recommended that they hedge by selling a 1-month Forward FX contract at the rate of 8.840 (Maybank buying rate).
When due (1 month later), the USD exporter account will be debited at USD 1 million and the IDR exporter account will be credited at IDR 8.84 billion.
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