Whether you’re buying raw materials abroad or selling goods manufactured in Switzerland to another country: foreign currencies play a significant role in foreign trade, and come with risks, but opportunities as well.

More planning security with foreign currency transactions

That’s why it’s vital, especially for SMEs, to give foreign currencies serious thought when doing business abroad. By managing foreign currency risks, you can increase your planning security and boost your competitiveness. Whatever the foreign exchange transaction, it is very important you pay close attention to the currency market to ensure you trade at the right time. The main reasons for the appreciation and depreciation of currencies are the economic performance of a country and global monetary and interest rate policies. To cover yourself against foreign currency risks and to use price fluctuations to your own advantage, three types of foreign exchange transaction are available.

Spot foreign currency transaction

With a spot foreign currency transaction, currencies are bought or sold when needed at the current rate, known as the spot rate. This allows companies to hedge against currency risks and to benefit from price fluctuations. With spot transactions, you can buy/sell foreign currencies immediately, or one to two working days after the trading date. Spot transactions are, for instance, a good idea for covering yourself straight away against any changes in exchange rate, or for capitalizing on a favourable exchange rate.

Example of a spot transaction:

A Swiss company receives a sum of money from a Norwegian purchaser in Norwegian krone (NOK). The company would like to convert this sum to francs to increase the liquidity in its Swiss francs account. The current rate is good, so the company sells the NOK and obtains Swiss francs at the current spot exchange rate.

Foreign exchange forward contracts

Foreign exchange forward contracts are when foreign currencies are bought or sold at a future point in time for a predetermined amount and rate. Thanks to the fixed exchange rate, companies can hedge against currency risks. They know what the cash flow will be in the future, and can budget on a fixed basis. If the exchange rates become more favourable after the transaction is completed, the company can no longer benefit.

Example of a foreign exchange forward contract:

A Swiss company orders machinery today for its new manufacturing facility from a supplier company in the USA. Under the contract, the machinery will be delivered in eight months and must be paid for in US dollars on the delivery date. To cover itself against the exchange-rate risks involved, four weeks after the contract is concluded, the Swiss company purchases the US dollar amount it owes the American supplier company  in return for Swiss francs at the seven-months forward rate. In seven months, the US dollars will be credited to the US dollar account of the Swiss company, and the corresponding amount in Swiss francs will be debited from the Swiss franc account.

Forex swap transaction

The forex swap is a combination of a spot transaction and a forward contract that allows a currency to be sold as a spot and simultaneously repurchased as a forward – or vice versa. Forex swap transactions help liquidity management, but are also exposed to the risks posed by changes in interest and exchange rates.

Example of a forex swap:

A Swiss company orders a machine from a German supplier company. The machinery should have been delivered and paid for within two working days, but this is delayed by three months. The Swiss company has already purchased euros to pay the invoice as planned. With a spot foreign currency transaction, the Swiss company sells the euro amount by the expiry date and at the same time buys the very same amount back as a forward in three months. Due to the difference in interest between euros and Swiss francs, the transaction can yield an advantageous exchange rate for the Swiss company.

Trade foreign currency online yourself: on the best exchange rates using the foreign currency tool (range of foreign exchange services in E-finance and in the PostFinance app)

Would you like to purchase and sell foreign currencies online as a PostFinance business customer? For trading amounts from CHF 1 to less than CHF 250,000, we provide a straightforward, accessible foreign currency tool, which you can view as a foreign currency account holder by going to the “Purchase /sell foreign currency” tile in e-finance. Here you can enter the amount you would like to trade, and the tool will take you through the process. Especially handy: thanks to a new service, several exchange rates are displayed for different value dates. In this way, you can conveniently compare the real-time exchange rates for each foreign currency and the costs, and choose the right offer. Furthermore, PostFinance customers trading larger amounts are automatically informed if there are more advantageous exchange rates for trading higher amounts.

You can carry out spot foreign currency transactions online from Monday to Friday, 8 a.m. to 5.30 p.m.

You can carry out any foreign currency transactions over the phone on +41 58 667 07 00 from Monday to Friday, 8 a.m. to 5 p.m.