FX forward

Product description

An FX forward is an instrument, which permits complete elimination of FX risk without the need to bear hedging costs. A Forward instrument is an agreement, under which Parties to a transaction undertake to conclude transactions of purchase or sale of a specific currency at a predetermined FX rate.

The FX rate in a forward transaction is always a forward rate and remains unchanged until the day of settlement of the transaction, regardless of changes of FX rate during validity of the agreement. The forward rate at conclusion of the forward transaction as well as later change of market value of the transaction is affected above all by the current level of the FX rate, the level of interest rates of currencies involved in the transaction for a period corresponding to the duration of the transaction as well as duration of the transaction.

An FX forward can be settled by physical delivery of the currency or by offsetting FX differences (in one of the transaction currencies) at the current FX rate.

Benefits

Customer benefits:

• an FX forward permits hedging FX costs even with very low notional, connected with operations (e.g. import) or financing in foreign currency
• transparent way of settling transactions
• the company's liabilities can be hedged in a selected time horizon (short and medium-term)
• selection of settlement method (with delivery of currency or by settlement of FX differences)
• flexible transaction parameters (settlement dates, transaction notional, an average rate for several settlement dates can be provided)
  

Risks

• valuation of a forward transaction during its validity can be negative to the market, which means that if the position gets closed this amount becomes the Customer's liability to the Bank
• if the market rate on date of settlement of the forward transaction is lower/higher than the forward rate of purchase/sale of currency, the Customer will incur a loss on the forward transaction in the amount of negative FX differences
  

Risk description is provided in „Description of risks associated with financial instruments and products offered in the Biznes and Corporate Banking Segment in Bank Millennium S.A.", as available in the Bank's outlets and on the Bank Web site www.bankmillennium.pl.

Additional information

If you are interested in treasury products please contact a Relationship Manager in the nearest Regional Corporate Centre or call a Product Specialist/Dealer:

Bydgoszcz, phone: (52) 325 94 22 / (22) 598 20 20
Gdańsk, phone: (58) 307 91 29, (58) 307 91 02 / (22) 598 20 25, (22) 598 50 54
Katowice, phone: (32) 784 08 28 / (22) 598 20 31, (22) 598 50 61
Kraków, phone: (12) 620 71 40 / (22) 598 50 56, (22) 598 20 23
Lublin, phone: (81) 531 77 45 / (22) 598 20 27
Łódź, phone: (42) 631 70 30 / (22) 598 50 52
Poznań, phone: (61) 885 69 75 / (22) 598 50 57, (22) 598 20 23
Szczecin, phone: (91) 434 82 62 / (22) 598 50 55
Warszawa, phone: (22) 598 50 63 / (22) 598 50 64, (22) 598 20 22, (22) 598 20 29
Wrocław, phone: (71) 370 41 94 / (22) 598 20 05

Legal disclaimers

All the information contained in this publication is for information purposes only and does not constitute either an offer or recommendation, or invitation addressed to anybody (or any group of people) to conclude transactions in financial instruments presented therein. In particular, the information contained in this publication does not constitute an offer in the understanding of the Civil Code Act dated April 23 1964 and is not a service of investment, financial, tax, legal or any other advisory.

This publication contains position of Bank Millennium S.A. („Bank") expressed on the basis of its own assessment of the facts material for the Bank and relative laws. The Bank assures that has spared no due diligence for the information contained in this publication to be reliable and based on authoritative sources, however, it cannot warrant that the information from sources external to the Bank is reliable, complete or up to date. Additionally, the Bank advises that the information and analyses contained in the publication have been based on the information derived from public sources that have not been independently verified by the Bank, and furthermore, can be subject to periodic fluctuations. The Bank shall not be held liable for any financial consequences of customer's transactions in financial instruments described in this publication. Also, the Bank reserves the right to make changes both in the form and in the content of this publication, at any time and without prior notice.

The conditions contained in the publication are of indicative nature only. All prices and (or) examples of transactions serve as illustration only and do not constitute a transaction offer under such conditions, or indication that the transaction under such conditions is possible. Furthermore, any calculations or results presented in this publication do not warrant future profits. The real terms and conditions for transactions in financial instruments shall be marked to market as established at the moment of transaction conclusion. All the tentative price quotations and analyses contained in this publication have been prepared on the basis on assumptions and parameters reflecting Bank's assessment or selection. The Bank does not warrant precision, completeness or rationale of these quotations or analyses.

The risk of utilisation of the information contained in this publication, in particular, as regards taking investment decisions on the grounds thereof, shall be carried exclusively by its recipient.

Financial transactions entail a risk, as presented in detail in „Description of risk related to financial instruments and products at Bank Millennium S.A."1), available at Bank's outlets and website at www.bankmillennium.pl. Everybody who purchases financial instrument assumes and carries liability for tax obligations resulting from the laws in force. In view of the above risks and circumstances, Bank's customers should have indispensable knowledge and experience in order to evaluate nature of every financial transaction under review and risks related thereto. In case of any doubts, customers should use tax, legal or investment advisory services. The Bank shall provide any additional information reasonably requested by the customer to enable assessment of related risks and transaction character.

Conclusion of transactions in financial instruments by the customer constitutes the grounds to recognise that the customer reviewed the transactions and related risks, and accepted them.

Dissemination and distribution of financial instruments and trading in them, may be subject to limitations in relation to some persons and states, in accordance with proper legislation. Demonstration of legal capacity and authorisations for investment in a given financial instrument rests with the customer. Offering and trading in financial instruments may be performed only in compliance with proper regulations of the law.

The information contained herein is disclosed exclusively for its recipient. The recipient is not entitled to copy, reproduce or transfer and disclose it to third persons in any manner, be it in full or in part (except for transferring it to his professional advisors) without prior written consent of the Bank.