Currency Spot Rate

Currency spot rate or FX spot rate is best thought of as the exchange rate one would have to pay in one currency to buy another at this moment in time. This is the rate most of us think of when talking about foreign exchange rates and the one used for most regular transfers and payments. Most traditional FX spot rate transactions usually settle two bank business days after the actual transaction took place because of the cross-border nature of payments, checks and reconciliations that are necessary to settle one currency vs. another. Nevertheless, advances in Real-Time Systems (RTS) infrastructure are opening ways to faster cross-border payments in many countries.

If your cash flows in foreign currencies are happening in the future they are sensitive to FX rate fluctuations until the payment time and can be hedged with instruments fixing forward rates.