Forward Rate

Forward Rate

  • Posted: Feb 23, 2015
  • By:
  • Comments: Comments Off on Forward Rate
Share This
« Back to Glossary Index

The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.

« Back to Glossary Index

Like what you've read?

Join thousands of other traders who receive our newsletter containing; market updates, tutorials, learning articles, strategies and more.

Previous Entry   Next Entry