FX budget rates

Currency budgeting isn’t flashy. But it’s fundamental. If you’re managing international costs or revenues, your FX budget rate underpins everything—from pricing and forecasting to board-level reporting.

This guide is designed to help you get it right. We’ll walk through the fundamentals, share practical strategies, and offer a few hard-earned insights from the front lines of FX risk management. Whether you’re new to this or refining an existing approach, there’s something here for you.

 

What is an FX budget rate?

It’s the exchange rate you use to plan for future currency flows. You’ll use it to estimate costs, set prices, and measure performance. It’s not the rate you get; it’s the rate you plan around.

Why does it matter? Because markets move. And if your budget rate is off, your numbers will be too. That can mean missed targets, squeezed margins, and could throw off your entire forecast. That’s why setting a realistic, defensible FX budget rate is essential.

 

Three ways to set a budget rate

There’s no universal method. But most businesses use one of these:

1. Spot rate

Use the current market rate when you set your budget. It’s simple, but risky, especially if your exposure is months away.

2. Rolling average

Take an average of past rates over a set period. This smooths out volatility but may lag behind market trends.

3. Forward rate

Use the rate available via a forward contract¹ for your future payment date. This gives you certainty, but you may need a hedging strategy.²

Tip: Whichever method you choose, document it. Make sure everyone, from finance to procurement, is working off the same assumptions.

 

¹Hedging Solutions may help offset the potential risk of foreign exchange rate fluctuations which could result in losses in upcoming expenses for goods, services, or direct investments via Moneycorp. To hedge your business' balance sheet exposure, additional products and services are provided by our Moneycorp Financial Risk Management Limited business.

²Forward contracts may require a deposit. This product should be used to facilitate payments for goods, services or direct investment.

Avoid these common mistakes

We see these all the time:

• Wishful thinking: Budgeting at a rate you hope to achieve, not one you can achieve.
• Ignoring volatility: Assuming the market will stay flat because it has for a few months.
• Siloed planning: Different teams using different rates.
• No backup plan: Failing to model worst-case scenarios.

 

A practical framework for FX budgeting

Here’s how we help clients build a resilient process:

1. Map your exposure

What currencies? How much? When? Include direct and indirect flows—supplier pricing, overseas payroll, client billing.

2. Define your risk appetite

Do you want certainty or flexibility? Some businesses lock in rates. Others prefer to stay open. Decide what suits your strategy

3. Choose your tools

FX tools include:

• Forward contracts: Fix the current rate for future payments.
• Market orders: Target a rate and automate execution.
• FX Options³: Manage downside risk while retaining upside.

4. Set your rate

Pick your method (spot, average, forward) and apply it consistently. Share it across teams.

5. Monitor and adjust

Markets change. So should your assumptions. Build in regular reviews and scenario planning.

³Options products may not be appropriate for all prospective clients.

 

Example: Budgeting for EUR/USD

You’re an Ireland-based manufacturer importing $2 million worth of components from the US over the next 12 months.

• Spot rate (EUR/USD): 1.17
• Open Forward rate (EUR/USD): 1.1650
• 6-month rolling average  (EUR/USD): 1.1530

You choose the forward rate, so your budget rate is 1.1650. You may also choose to book an open Forward Contract to secure this rate on a portion of your expected exposure. That gives you certainty and ensures you do not go below your budget rate on the booked portion of your requirement - even if the US dollar strengthens.

A Forward Contract may require a deposit.

 

For complex operations

If you’re managing FX across multiple regions or entities:

• Centralise your FX strategy: Avoid internal arbitrage.
• Use tech: Automate rate tracking, execution, and reporting.
• Work with specialists: Access competitive pricing and execution.

FX budgeting isn’t about predicting the future. It’s about planning for it. A solid budget rate gives you control, clarity, and confidence. It helps you manage the FX risk against your margins, hit targets, and make better decisions.

If you’re reviewing your approach or building one from scratch, we’re here to help. Let’s make FX one less thing to worry about.

 

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.