Forward Rates for Corporate Treasury and Risk Management

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On Tuesday, July 24th, we announced the launch of forward rates on OANDA's Exchange Rates API. The original press release can be found here or you can get access to forward rates


Different roles within a company use different data sets to succeed at their job. From auditors and accountants who use historical rates and daily averages, to software engineers and product managers who leverage real-time rates, the data needed for each job varies greatly. Treasury and Risk Management departments, in particular, will utilize a specific set of data, forward rates, to make informed market decisions on behalf of the company.

This article describes what forward rates are, how they’re used, and which forward rate source you can trust.
 

Get Access to Forward Rates

What are forward rates?

A forward rate is an exchange rate at which two parties agree to exchange one currency for another at a future date. The forward exchange rate is determined by the spot exchange rate and differences in interest rates between two countries.

Who uses forward rates and why?

Forward rates are used for both hedging purposes and financial reconciliation.

  • Financial Reconciliation: Forward rate data is used by finance teams and especially Treasury departments for financial reporting.

    Similar to real-time FX rates, forward rates are constantly changing intraday with market activity. Because these rates fluctuate within the market, companies often monitor forward rates to track changes in future cash flows as well as the mark-to-market value of existing forward contracts.

     Monitor forward rates to track changes
     in both future cash flows and the
     mark-to-market value of existing
     forward contracts.

  • Hedging: Contractually locking in a forward rate to exchange one currency for another at a future date is called a “forward contract”. Locking in a specific price for a future transaction reduces the effect that currency volatility might have on your bottom line. Hedging via forward contracts is one of many strategies for risk management.

Where can I access forward rate data?

While forward rate data can occasionally be requested from banks on an ad hoc basis, most professionals who regularly work with this data need on-demand access to quality forward rate data.

Automation of data has long been an industry best practice and the use of Exchange Rates APIs makes it effortless to get a constant feed of forward rates or other FX data. These APIs can easily be integrated into Treasury Management Systems, ERPs, billing software, and more so the data you need is delivered and configured exactly to your needs.

The OANDA Exchange Rate API offers 360+ forward rate currency pairs, more than any other currency data feed on the market. Forward rates are available for tenors (or f In addition to forward rates, OANDA’s API also provides daily averages, real-time (spot) rates, tick-level data and historical data back to 1990.

Our API is a secure, yet simple REST API and was built to offer peace of mind. It offers:

  • An uptime of 99.99% with fully redundant servers
  • Infrastructure co-located with the main participants in the interbank market, directly connected to over 20 top foreign exchange banks
  • Easy integration with any ERP, Treasury Management System, accounting/financial software, website, or mobile applications
  • Resources like integration documentation, our developer portal, and installation support
  • Formatting in JSON, XML, and CSV offers the flexibility to fit any product, application, or website


For more information or to get access to forward rates, contact us here.