Leads And Lags

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DEFINITION of 'Leads And Lags'

The alteration of normal payment or receipts in a foreign exchange transaction because of an expected change in exchange rates. An expected increase in exchange rates is likely to speed up payments, while an expected decrease in exchange rates will probably slow them down.

INVESTOPEDIA EXPLAINS 'Leads And Lags'

Accelerating the transaction is known as "leads", while slowing it down is known as "lags". Leads will result when firms or individuals making payments expect an increase in the foreign-exchange rate, while lags arise when the exchange rate is expected to fall. Leads and lags are used in an attempt to improve profits.

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