Foreign Exchange Market

HSBC has the expertise to help you with all your Treasury forecasting and risk management needs. We provide comprehensive foreign exchange services to corporate and institutional clients in Spot, Forward, and Currency options (both Vanilla and Exotic). We work on helping you find the best solutions to hedge currency exposures ranging from emerging to G7 currencies.

Spot Contracts

A spot contract is a binding obligation to buy or sell a certain amount of foreign currency at the current market rate, for settlement in two business days time. To enter into a spot deal you advise us of the amount, both currencies involved and which currency you would like to buy or sell.

Key features and benefits

• No minimum deal size.
• Wide range of currencies.
• Benefit from favourable movements in the spot rate until the deal is done.
• Unprotected against unfavourable movements in the spot rate until the deal is done.

Forward Exchange Contract

A Forward Exchange Contract is the simplest method of covering exchange risk, without having to worry whether the spot market is going to move against you. This overcomes one of the problems that you can experience when importing or exporting in foreign currency, as you can now budget at a guaranteed rate of exchange.

A forward Contract is a binding obligation to buy or sell a certain amount of foreign currency at a pre-agreed rate of exchange, on a specified date in the future. To take out a forward contract you need to advise us of the amount, both currencies involved, the maturity date and whether you would like to buy or sell the currency on that maturity date.

Pricing

The price of a forward contract is based on the spot rate at the time the deal is booked, with an adjustment, which represents the interest rate differential between the two currencies concerned.

Key features and benefits

• Protection against movements in exchange rates.
• A binding obligation to deal at a specific rate.
• No upfront cost involved.

Currency Options

Currency options allow your company to actively manage its foreign exchange exposure by providing a form of "insurance" against adverse market moves while still allowing you to benefit from any favourable market moves. Like all insurance, a premium is typically paid for that protection. That premium can be minimized or eliminated by selling an option that limits some of your upside market potential. Currency options are used by companies wishing to protect profit margins while still retaining the ability to benefit from favourable market moves and companies wishing to hedge contingent exposures such as project tenders.

Key features and benefits

• Allow for flexible terms, can be custom tailored to your company's needs.
• Available for all major currencies.
• Allow more active management of your company's foreign exchange exposure.
• Possible to structure into strategies, usually zero-cost.