What is a dynamic forward?​

Dynamic forward FX payment solutions are financial instruments designed to protect businesses from exchange rate fluctuations when making future payments in foreign currencies. They offer a guaranteed "protection rate" for the transaction, while also providing the opportunity to benefit from a more favourable exchange rate if the market moves in your favour before the payment date.

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What are the different types of dynamic forward FX payment solutions?

Monetae offers five main types of dynamic forward FX payment solutions:

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• Guaranteed forward FX payment with full participation: Allows you to benefit fully from any favourable exchange rate movement at the settlement date.

• Guaranteed forward FX payment with partial participation: Lets you benefit from a more favourable rate for a predetermined portion of your payment.

• Guaranteed forward FX payment with capped participation: Offers a maximum "capped" exchange rate benefit, even if the market moves more favourably.

• Guaranteed forward FX payment with activating participation: Allows participation in a favourable exchange rate only if the market surpasses a predetermined "activating threshold rate".

• Guaranteed forward FX payment with capped activating participation: Combines the benefits of capped and activating participation, allowing for participation within a defined range.

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What is a "protection rate"?​

The "protection rate" is the guaranteed exchange rate you will receive for your foreign currency transaction, regardless of market fluctuations. It provides a safety net, ensuring you can make your payment at a predetermined cost.

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What is a "participation rate"?​​

The "participation rate" is applicable to certain dynamic forward contracts and determines the exchange rate you receive if the market moves favourably within a specific range or beyond a threshold.

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What are the advantages of using a dynamic forward FX payment solution?

Dynamic forward FX payment solutions offer several benefits, including:

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• Guaranteed protection rate: Eliminates the risk of adverse exchange rate movements.

• Potential for better rates: Allows you to benefit from favourable market movements.

• Flexibility: Tailor solutions to your specific risk appetite and financial goals.

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What are the potential downsides of using dynamic forward FX payment solutions?

While offering advantages, it's important to consider potential drawbacks:

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• Fees: Some solutions involve upfront or ongoing fees.

• Missed opportunities: In some cases, you might miss out on larger favourable market movements depending on the specific contract structure.

• Commitment: These contracts involve a firm commitment to purchase the foreign currency.

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What is a margin call?​​

A "margin call" is a possibility with some dynamic forward contracts. It occurs when the market moves unfavourably, requiring you to deposit additional funds to cover potential losses.

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How do I choose the right dynamic forward FX solution for my business?

Choosing the right solution depends on your specific needs and risk tolerance. Factors to consider include:

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• Transaction size and frequency: The volume and regularity of your foreign currency payments.

• Risk appetite: Your willingness to accept potential exchange rate fluctuations.

• Market outlook: Your expectations for future exchange rate movements.

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