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A currency forward contract is an agreement between two parties to exchange a fixed amount of one currency for another at an agreed upon future date. The exchange rate for future transactions is fixed in advance at the time of signing the agreement. There are two types of currency forward contracts: outright forwards and non-deliverable forwards. Outright forward contracts involve actual currency exchange, while non-deliverable forward contracts are settled in a single currency such as the US dollar. These contracts can be used for speculation or risk management. This tutorial focuses on outright forward contracts and provides an example scenario of a US technology company expecting a payment in British pounds in 90 days.
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