Why locking in forex rates is critical in choppy currency markets

By locking in forex rates, travelers and students can secure the best forex rate, avoid currency depreciation, and save up to 10%.

The foreign exchange market is inherently volatile, with currency values fluctuating due to global economic trends, geopolitical events, and monetary policies. Over the past year, the Indian Rupee has depreciated considerably against the US Dollar.

In February 2024, the exchange rate stood at approximately Rs. 82.64 per USD. By February 2025, it had peaked at Rs. 87.79 to the Dollar, marking a decline of about 6.2 percent.

For anyone traveling abroad, studying overseas, or remitting money internationally, currency fluctuations can have a significant financial impact. Here are three key reasons why locking in forex rates is essential:

Protection 

Even minor currency fluctuations of Rs 2-3 per Dollar can lead to unexpected financial losses when traveling abroad. Take, for instance, a couple planning a 10-day US holiday in December 2024. They budgeted expenses of $5,000 each when the exchange rate was Rs. 83.50 per USD, expecting to spend around Rs. 8,35,000.

However, by the time they travelled in February 2025, the INR had weakened to around ₹86.60 to the Dollar, pushing their total cost to ₹8,66,000 — an extra ₹31,000, ie, a 3.7 percent increase.

While the Reserve Bank Of India (RBI) allows forex purchases up to 60 days in advance, many travellers delay buying hoping for a better rate, or worse, use their credit and debit cards abroad, leaving themselves vulnerable to daily currency fluctuations and hidden markup fees.

Historically, the Rupee has depreciated significantly against the US Dollar. In 1947, the exchange rate was ₹3.30 per USD. As of February 2025, it stands at approximately ₹86.88 to the  USD. Hence, last-minute forex purchase can be a risky and costly error. By locking in forex rates early, travellers can protect their budget, avoid surprises, and enjoy a stress-free vacation.

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Predictability 

For students studying abroad, budgeting is paramount. Exchange rate fluctuations can impact everything, from tuition fees to living expenses.

Consider a student who, in February 2024, budgeted $40,000 for annual tuition fees at a US university. Based on the exchange rate at that time, ie, Rs. 82.64 per USD, this amounted to approximately ₹3,305,600. However, by February 2025, the Rupee had depreciated to around ₹86.60 per USD. As a result, the same $40,000 would now cost ₹3,464,000 — or, ₹1,58,400 more. Locking in forex rates early helps students avoid such financial shocks, and ensures peace of mind for their families.

Also read | Rupee depreciation: How Indian students can minimise impact on overseas education budget

Maximise savings

Further, by locking in the best forex rate travellers and students can  also save up to 10 percent. Here’s how:

Leverage technology

Waiting for the perfect forex rate requires patience and market awareness. Instead of constantly monitoring rates, travellers can set up alerts on online forex platforms, which will tell them when their desired rate is available.

But what if they receive an alert and aren’t ready to buy yet? That’s where features like `Book Now, Pay Later' come in. A few forex platforms and fintech players allow users to lock in the best rate while giving them a few days to complete the payment — ensuring that they don’t miss out on a good deal.

Use a forex card

Using an INR-based credit or debit card abroad can be risky, as each transaction is subject to exchange rate fluctuations and forex  markup fees of up to 3 percent. Which means that unexpected rate hikes can significantly dent one's finances.

A forex card, on the other hand, locks in the exchange rate at the time of loading, ensuring that future transactions are at the same pre-fixed rate — without any surprises or hidden fees. With a forex card, travellers can enjoy an anxiety-free holiday and ensure protection against currency depreciation, unlike INR-based cards that leave them vulnerable to market shifts.

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Forward contracts

For students planning to study abroad and needing to make large payments for tuition fees, forward contracts can be quite useful. A forward contract allows parents to lock in exchange rates for a future date. By securing a fixed rate in advance, they can avoid the risk of their international money transfers becoming more expensive if the forex rate moves unfavourably.

However, forward contracts come with premiums based on the duration, so it’s essential to evaluate these costs against potential savings. Forward contracts can be booked by banks, so consulting yours early can help you assess this option, analyse the premium charged by your bank, and incorporate financial predictability into your planning.

Beyond financial savings, locking in forex rates eliminates the stress of constantly tracking currency movements and worrying about further depreciation. With a locked-in rate, individuals and students can confidently plan their expenses, knowing they won’t be affected by currency fluctuations and a weakening Rupee.

The author is Founder & CEO of BookMyForex.com.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.