Contracts, Swaps and Options

Our Treasury team will tailor a foreign currency transfer, whenever and however you need it at and always at the best possible rates for your business.

Spot and Forward Contracts

A spot trade is the instant purchase or sale of a foreign currency or commodity. Spot contracts are the most common type of currency transfers. With a spot trade you can:

  • Trade in more than 25 currencies
  • Manage quick overseas or cross-currency payments or receivables

As a business, you want to avoid risks and uncertainties that are associated with exchange rate movements. A forward contract helps you do this by arranging to transfer money at a future date and at an exchange rate that is agreed beforehand. With a forward contract you have:

  • A hedging tool that does not involve any upfront payment
  • The certainty of execution on a rate and maturity date agreed beforehand

Swaps

If you are looking for a foreign currency loan at a better interest rate than you could obtain by borrowing directly in a foreign market, you need a currency swap. With a currency swap you can exchange the principal amount of a loan and the interest payable on it in one currency for the principal and interest in another. By setting up a currency swap you:

  • Agree the exchange of a principal amount at the spot rate
  • Swap back the principal at either the prevailing rate or the spot rate or at a pre-agreed rate
  • Can manage your cash flows better

An interest rate swap allows you to agree to exchange the future interest rate payments you make over a set period on loans or bonds. LIBOR is the benchmark for floating short-term interest rates and is set daily. With an interest rate swap you:

  • Can manage your cash flows and interest rate risk better
  • Make no exchange of the principal

Currency Options

A foreign exchange option (commonly known as an FX option or currency option) gives you the right but not the obligation to exchange money from one currency into another at a pre-agreed exchange rate on a specified date. With such an option you:

  • Have the right to buy or sell without any obligation
  • Have the flexibility to decide whether to take up the option depending on circumstances
  • Pay an upfront premium for the option

Forward Rate Agreement (FRA)

If you are looking to protect your business against future movements in interest rates, a Forward Rate Agreement, or FRA, is perhaps your best option. By entering into an FRA, you:

Lock in an interest rate for an agreed period starting on a future settlement date

Specify a principal amount

Hedge against future interest or exchange rate exposure

Structured Deposits and Notes

Emirates NBD offers you the benefit of both a deposit and an investment product with our Structured Deposit. Features of these deposits include:

  • The potential for higher returns compared to fixed deposits
  • May be taken in 'tranches' with either a fixed offer period or available until the tranche is fully subscribed (tranches may come with differing features and returns)
  • Returns may depend on the performance of the underlying investment product

Our Structured Note combines a bond (to protect your principal) and a derivative element. The bond makes up most of the investment (typically 80%), and the derivative element gives you exposure to potentially higher returns. Features of the note include:

  • Protection of your principal invested (if held to maturity)
  • Terms of between 18 months and six years
  • Higher potential returns than a simple deposit

Dual Currency Deposits (DCI)

An Emirates NBD Business banking dual currency deposit allows us to repay your deposit in a different currency at maturity. This is a short-term investment that offers you the possibility of receiving a higher return through moderate movements in exchange rates. Features of these deposits include:

  • Combination of a cash or money market deposit with a foreign exchange option
  • The capital and interest can be converted into an alternative currency
  • The more the risk the higher the potential yield
  • The yield depends on several variables including currency pair, term, market interest rates and volatility of currencies used

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