Foreign Currency Transactions

A spot is an exchange transaction executed immediately at the exchange rate of the moment in which the transaction is agreed. In the case of a forward, an exchange rate can be agreed today, for a transaction that will occur in the future. The agreed exchange rate is directly linked to the time frame of the transaction and to the interest rate differential for the currency pair.


  • Forward transactions do not require disbursement at the moment of the deal, this presents certain advantages such as the possibility of establishing currency strategies without the need to alter the composition of the investment portfolio.
  • It is possible to exit this type of contracts before expiration by performing the inverse transaction, but with the same settlement date, therefore eliminating the risk involved in additional fluctuations.
  • Financial leverage is obtained through the use of forward transactions.


This type of transactions can be used as hedging strategy. It is common to fix an exchange rate for a cash flow that will occur in the future, be it the maturity of an asset or any other predicted inflow.

They can also fulfill speculative purposes throuh trading transactions, the usual is to take a certain exposure that is expected to generate profit given that the future exchange rate will be worse than the one agreed today.


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