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drawdown

In FX forward markets, a drawdown refers to the act of performing an early draw, i.e. exchanging a portion of the total amount specified in a flexible FX forward contract before the expiration of the contract.The period in which the contract holder can activate such drawdowns, for example three months, is established in the contract terms.

Flexible forward contracts are an effective method of hedging against currency risk, and allow the contract holder to make regular payments using the same exchange rate for a specific time period. They can therefore be useful for companies that make regular payments to an overseas supplier