Forward Contract Against an Export

A forward exchange contract against an export is an agreement between the importer and exporter to exchange a specified amount of the importer's currency for the exporter's currency. This is done on the date payment for an export is due, using the existing currency exchange rate at the time the contract for sale is made. The exchange rate is composed of the currency's spot price, the bank transaction fee, and an adjustment for the difference between the currencies' interest rates.