Outright Forward Contracts: 2025 Guide for Australian Businesses

Currency swings can wipe out profits in a heartbeat. With global markets facing fresh uncertainty in 2025, outright forward contracts have become essential for Australian businesses trading internationally. But what exactly is an outright forward, and why is it gaining traction in today’s market?

What is an Outright Forward?

An outright forward is a binding agreement between two parties to exchange a specific amount of currency at a predetermined rate on a set future date. Unlike flexible hedging tools, outright forwards lock in the rate—offering certainty but requiring commitment. They’re particularly popular with importers and exporters who want to budget with confidence, no matter how the Australian dollar (AUD) moves.

• Fixed exchange rate: No surprises—what you lock in is what you get.
• Set maturity date: Typically anywhere from a week to 12 months out, though some banks will stretch further for large clients.
• No upfront premium: Unlike currency options, outright forwards don’t require a fee to enter the contract.

For example, an Aussie wine exporter expecting to receive USD payments in six months could lock in today’s rate, ensuring their profits aren’t eroded by a falling USD/AUD exchange.

2025 Update: Why Outright Forwards Are Back in Focus

With the RBA maintaining a cautious stance on rates and global uncertainty persisting into 2025, currency volatility remains a top concern for CFOs and treasurers. Recent policy updates and market trends include:

• RBA Rate Path: As of May 2025, the Reserve Bank of Australia continues to signal a ‘higher for longer’ rate environment, keeping the AUD susceptible to global shocks.
• Export Growth: New trade agreements with India and Southeast Asia are driving cross-border flows, exposing more businesses to FX risk.
• Tech-Driven Platforms: Australian banks and fintechs have upgraded their FX hedging portals, allowing SMEs to book outright forwards online with minimal paperwork.

In this context, outright forwards are seeing renewed interest. According to the Australian Financial Markets Association’s 2025 survey, usage of FX forwards by mid-sized businesses has jumped 18% year-on-year—outpacing options and swaps.

Practical Strategies for Using Outright Forwards

Outright forwards aren’t one-size-fits-all. Here’s how Australian businesses are using them effectively in 2025:

• Budget certainty: Locking in costs for imported machinery or overseas project payments, so cash flow is predictable and project margins are protected.
• Invoice hedging: Matching forward contracts to scheduled foreign currency receivables or payables, minimising exposure to unfavourable currency moves.
• Rolling hedges: Staggering forward contracts across several maturity dates to smooth out the impact of sudden market moves.

Take the example of a Brisbane construction firm importing steel from Japan. With the AUD/JPY rate especially volatile in early 2025, they booked three outright forwards for staggered deliveries over the next nine months, locking in costs while maintaining operational flexibility.

Risks and Considerations

While outright forwards offer certainty, they require a firm commitment. If your business’s needs change—say, a shipment is cancelled—you might face a ‘closeout’ cost if the market rate has moved against your contract. It’s also worth noting that outright forwards don’t let you benefit if the exchange rate moves in your favour after you’ve locked it in.

Best practice? Integrate currency hedging into your broader risk management strategy, and review positions regularly as market conditions change. Most major Australian banks and FX brokers offer tailored support to help businesses assess their exposure and select the right hedging mix.