Forward to forward contract

A forward to forward contract is a swap transaction that involves the simultaneous sale and purchase of one currency for another, where both transactions are forward contracts. It allows the company to take advantage of the forward premium without locking on to the spot rate. The spot rate has to be locked onto before the starting date of the forward to forward contract. It is a perfect tool for corporate houses that want to take advantage of the opposite movements in the spot and forward market by locking in the forward premium at a high or low level now.