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In order to avoid any risk with currency fluctuations, BCP Bank (Mauritius) will allow for a leap forward and set the rate for future transactions.

The currency forward operation allows for the agreement of a rate of exchange between two currencies at the moment an operation (which is planned for ulterior delivery) is performed. The rate agreed upon is called a currency forward rate.

The contract is based upon the nominal value of the operation; the term (date at which the currencies will be bought or sold) ; the choice of currencies and the currency forward rate agreed upon. This contract is concluded between your company and Banque des Mascareignes. It binds both parties to abide by the terms of the contract at its due date.

Benefits

  • Currency Forward is an elastic safety net: whatever fluctuations are registered between the moment you conclude your operation and its due payment date bear no incidence on margins set, as the exchange rate has been fixed beforehand.
    • Importations - When importing, Currency Forward sets the currency buying rate upstream for the settlement of your imports downstream. That way, you are protected against any appreciation in the exchange rate and subsequently that of the buying price.
    • Exportations - When exporting, Currency Forward sets the currency selling rate upstream for the settlement of your exports downstream, thus allowing for the protection against any drop in the exchange rate and subsequently that of the selling price.

Currency Forward is an ideal tool to optimise provisional management. As it gives control over currency rate fluctuations, it also gives control over cash inflow and outflow and helps to remain within budget objectives.

  • No disbursement is required upstream of the operation. No premium to be paid. For either an exportation or an importation, your account is credited or debited solely at the due date.
  • The flexibility is yours. Depending on your needs, you decide upon the conditions of your currency forward contract, thus allowing you to stay in control!

How does it work?

The currency forward rate is determined by the spot price, as well as the interest rate applicable to the selected currency. It might be reduced or increased by the difference between the respective interest rates applicable to the two implied currencies.

In the event that the commercial contract is cancelled, the transaction will still have to be settled by either buying or selling the currency, therefore subject to potential currency risk.

Investment

Risk Management