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When to use a spot contract
Spot contracts are ideal when your business needs to make an international payment quickly. You agree a rate, and funds are typically delivered within two business days (referred to as T+2). For major AUD pairs, same-day or next-day settlement is often available if booked before cut-off times.
However, relying solely on spot contracts without a broader hedging strategy can be a high-risk approach. Currency markets can move significantly from one day to the next. If your business has foreseeable international payment obligations, it’s worth considering how spot trades fit into a wider policy alongside forwards and options.
Spot Contracts vs Forward Contracts:
A spot contract allows you to trade immediately at the current rate. A forward contract, by contrast, lets you lock in a rate today for a future payment date, providing budget certainty and protection against adverse moves.
If you have the luxury of time and want to avoid a scenario where the market moves against you before settlement, a forward contract may be the better tool. Your account manager will help you determine which instrument fits your situation.
What makes us different
SmartHedge PRO
SmartHedge PRO is our currency management platform that makes tracking exposures simpler than ever. Developed and tested to address pressing challenges growing companies face, SmartHedge PRO offers automated solutions that allow business to spend less time pouring over spreadsheets and more time making the decisions that matter.
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Frequently Asked Questions
What is a currency spot contract?
A spot contract is an agreement to buy or sell foreign currency at the current market rate, with settlement typically within two business days. It is used for immediate or urgent international payments.
How quickly can a spot contract be settled?
Spot contracts settle on a T+2 basis (two business days). For major AUD pairs like AUD/USD and AUD/EUR, same-day or next-day delivery is often available if booked before specific cut-off times.
When should my business use a spot contract?
Spot contracts are ideal for businesses with immediate payment obligations that are satisfied with the current market rate and do not need to hedge against future currency movements.
How is a spot contract different from a forward contract?
A spot contract uses the current market rate for immediate delivery. A forward contract locks in a rate today for a payment at a future date, providing protection against market volatility between now and settlement.
