Noon Average Rate Contract - NARC

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DEFINITION of 'Noon Average Rate Contract - NARC'

A type of currency forward contract that refers to the Bank of Canada's average noon rate for foreign exchange as a benchmark. The contract's negotiated exchange rate is compared to the noon rate and the two parties settle the difference in cash. NARCs usually refer to the USD/CAD exchange rate.

INVESTOPEDIA EXPLAINS 'Noon Average Rate Contract - NARC'

The noon rate is the spot exchange rate posted by the central bank every business day at noon. This contract is designed to help mitigate foreign exchange risk. Because NARCs are marked-to-market daily, the parties involved will hedge their currency exposure throughout the life of the contract, even if they choose to close their positions early.

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