when a business has an expected foreign exchange transaction it may need to buy or sell the currency that it needs to complete the transaction currency prices move in response to supply and demand between forex traders companies and nations on the forex market a transaction between currencies settles on the spot date for most currency pairs this is two business days after the order was placed companies might also enter into a currency forward contract which locks the rate of the exchange 
if it is expected that a currency s future price will decline against the spot price it is known as a forward discount counterparties apply forward points to the future exchange creating either a forward discount or a forward permium examples of timing a foreign paymentcurrency exchange rates are difficult to forecast but certain financial and political events may play out according to a predictable schedule these predicable scheduled events can provide insight into the direction of a exchange rate such events can include elections and budget deadlines for example great britain s decision to exit the european union known as brexit was triggered by a referendum on june 23 2016 the british pound fell in value versus the u s dollar immediately after the vote it kept falling for some weeks afterward before recovering slightly as of may 25 2022 it still has not recovered to its pre brexit levels 1if a u s company has agreed to buy a canadian asset it will need to buy canadian dollars and sell u s dollars to complete the transaction the canadian dollar moves constantly in its value compared to the u s dollar in the year ending may 25 2022 for example the canadian currency ranged between about 1 20 and about 1 30 in comparison to the u s dollar 2if the company believes the canadian dollar is going to strengthen against the u s dollar it will accelerate the transaction lead before the price of the asset increases in u s dollar terms if the company believes the canadian dollar will weaken it will hold off payment lag in the hope that the bill becomes cheaper in u s dollar terms 