Forward exchange transactions

General

It refers to the foreign exchange transactions to be fulfilled upon maturity per currency, sum, term, and exchange rate specified in the agreement between customer and bank, in which the foreign currencies, sum, term and exchange rate are agreed upon for future transaction.

Features

1.Fixed cost and hedging: This service may help a company to fix the costs in terms of foreign exchange to gain, which will serve to ensure currency value and facilitate the financial personnel of a company to accurately predict the cost and benefit; 2.Types of business: There are two types of business available, fixed date transaction and option forward transaction. Fixed date transaction means that the settlement date is a fixed date in the future. However, if a company will receive or pay any foreign currency at an unfixed date, it may choose option forward transaction, which will make it convenient for the company to flexibly choose a transaction date and to make good use of the fluctuation of exchange rate immediately.

Conditions for application

More than three working days of the bank and within a year; Specific transaction term is subject to the requirements of the customer.

Price of Forward Exchange Transactions

The trade price shall be subject to the trade price at each branch of CGB.

Cases

On 20th July, a company signs an export agreement of 5 million Euro with its American partner and the date for warrant of that sum will be 22nd October of the same year. The current Euro/USD spot exchange rate is 1.3211 and the Euro/USD forward premium after 3 months is 34 points. The company expects that the Euro/USD exchange rate will fall in the future and the depreciation range will be far more beyond 34 points.

The company chooses to transact forward RMB-FX trading with CGB to fix the cost and the realized exchange rate at settlement after 3 months is fixed at 1.3211 - 0.0034 = 1.3177.

Three months later (22nd October), if the Euro/USD spot exchange rate is 1.3065 and the devaluation range of Euro exceeds 34 points to 146 points, the company will make a profit of USD 56,000 (5,000,000 × (0.0146 - 0.0034) = 56,000) out of Forward Exchange Transactions.

Service Channel

Business Outlets

Kind Reminders

Capital transaction credit line by CGB is required for the transaction of this service. For application of capital transaction credit line, please contact relationship manger of local branch.

Related Financial Instruments

RMB/foreign exchange rate

Inquiry at business outlets