Foreign exchange volatility is a constant challenge for businesses operating across borders. Whether you are an online travel agency (OTA) quoting fares, an e-commerce platform managing multi-currency checkouts, or a corporate treasury planning supplier payment, the need for pricing certainty is clear.

At M-DAQ, two of our solutions address this in different ways: Guaranteed Rates and Forward Contracts. Both fix an exchange rate in advance, but their mechanics, and use cases are fundamentally distinct.

Guaranteed Rates: Short-Term Transactional Stability

Guaranteed Rates are an M-DAQ solution that lock in a fixed exchange rate for a short validity window, typically up to 72 hours. During this period, clients will be able to convert at the locked in rate regardless of currency volatility. Settlement supports both spot and forward conventions.

Characteristics

• Validity: Typically up to 72 hours.
• Settlement: Customisable.
• Flexibility: None. The rate is fixed and non-discretionary.
• Purpose: To stabilise pricing for transactions in the order-to-settlement cycle.

Industry Applications

• E-Commerce: Shoppers see a fixed local currency price when shopping online even as global FX rates fluctuate continually and are charged exactly that at settlement.
• Travel & OTAs: Plane ticket quoted today holds when processed two days later.
• Marketplaces & B2B platforms: Transactions remain shielded from intra-day FX swings, simplifying reconciliation.

By removing rate uncertainty, Guaranteed Rates enhance customer trust and drive higher conversion rates in industries where pricing transparency is critical.

Forward Contracts: Forward-Dated Hedging, Priced by Interest Differentials

A forward contract fixes today’s exchange rate for a transaction that settles beyond spot (T+3 or later). This allows treasuries to secure predictability over future cash flows and protect against volatility on the balance sheet.

How it’s Priced

Forward pricing is governed by covered interest rate parity (CIRP). The forward rate starts from the spot rate and adjusts for the interest rate differential between two currencies over the tenor.  

Essentially, Forward Rate = Spot Rate +/- (Swap Pts/10,000), where Swap Pts is the interest differential of currencies exchanged during the tenure.

Swap points are quoted in pips (the fourth decimal place), so they must be divided by 10,000 before being added to or subtracted from the spot rate.

Furthermore, forward pricing is not arbitrary. It is anchored in interest rate parity, and the swap points shown on platforms like Bloomberg are simply the market’s way of expressing this relationship.

Example

On 10 September 2025, the rates are:

• Spot Ask: 1.2827
• 1-Month Swap (Ask): –30.62

Hence, the Forward Ask is 1.2827−0.003062=1.27938.

What goes into the rates: Dealers typically reference overnight index curves, for example SOFR for USD and SORA for SGD, then apply the relevant FX basis and day-count conventions. Liquidity, credit lines, calendars and odd-date interpolation also influence executable points, which is why quotes vary slightly by counterparty even though the parity relationship holds.

Industry Applications

• Exporters/importers hedging receivables or payables.
• Corporates protecting operating margins from FX swings.
• Institutional investors hedging portfolio exposures.

Comparison At-A-Glance

Think of Guaranteed Rates as a food voucher valid for three days. You can drop in for at any time within that period, and the price is locked in regardless of what happens in the market. Even if you don’t use it, you won’t be penalised.

Forward Contracts are like reserving a banquet two months ahead. You agree on the menu and the price upfront. You can’t redeem it earlier, and when the day arrives the cost is fixed and you’re contractually obliged to pay.

An OTA locking fares for 48 hours relies on Guaranteed Rates, while the same company’s treasury may use forwards to hedge USD receivables six months out.

Conclusion

Both instruments deliver certainty, but in different ways. Guaranteed Rates are operational, giving customers fixed-rate confidence during short-cycle transactions where transparency drives trust and sales. Forward Contracts are market-based rates employed  strategically, enabling treasuries to lock in cash flows, manage exposures, and protect the balance sheet.

At M-DAQ, we offer both, giving businesses the flexibility to manage FX across the entire spectrum, from checkout to treasury.

If you’d like to explore how these tools can support your business, our team would be glad to walk you through your specific use case.

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