When two parties agree to exchange currency and execute the deal at some specific time in the future, a forward exchange occurs.

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This is because in a forward exchange, the parties agree on the exchange rate and execute the deal at a later date, typically ranging from a few days to several months or even years in advance. This allows them to hedge against currency fluctuations and manage the risk associated with foreign exchange transactions.

When Two Parties Agree to Exchange Currency and Execute the Deal