A contract that involves a foreign currency transaction and entails the payment, at maturity, of the differences between a forward currency exchange rate as observed on the start date and the spot rate at settlement. Differently stated, the parties to the agreement exchange one currency for another at a predetermined exchange rate on a specific date in the future.
Forward exchange agreements (FXAs) allow investors to protect themselves against future exchange rate fluctuations, usually for periods up to one year.
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