Currency Forward Rate Calculator
From the spot rate and two interest rates, compute the forward rate (covered interest parity, with days): F = S x (1 + r_f·T) / (1 + r_d·T), T = days/360.
Input Data
Results
At a glance:Forward rate F = S x (1 + r_f·T) / (1 + r_d·T), T = days/360, quote = local per foreign. It is the no-arbitrage price locked today for future delivery, set by covered interest parity. The higher-rate currency tends to be forward-discounted to offset its interest advantage. WARNING: Real quotes add spreads, day-count (360/365) and costs; education only, not a forecast.
Formula
F = S x (1 + r_f x T) / (1 + r_d x T), T = days / 360.
S = spot, r_f = foreign rate, r_d = domestic rate (quote = local per foreign).
$$$S$ $r_f$ $r_d$ $T=\\dfrac{\\text{Days}}{360}$$$$$( 8 5% 2%360 )$8\\times\\frac{1.02}{1.05}\\approx7.7714$$$How to Use
- Enter the spot rate (local per foreign).
- Enter the domestic and foreign annual rates.
- Enter the days to view the forward rate.
FAQ
What is a forward rate and its relation to spot?
A forward rate is the exchange rate agreed today but settled on a future date, versus the spot rate (immediate settlement). Their gap is set by the interest-rate differential via covered interest parity: F = S x (1 + r_f·T) / (1 + r_d·T). This is a no-arbitrage price, not a market forecast of the future spot.
Why is the higher-rate currency often forward-discounted?
No-arbitrage again. If domestic rates exceed foreign, holding domestic earns more interest; to prevent risk-free 'borrow foreign, convert, earn domestic, convert back' arbitrage, the forward must make the domestic currency appreciate (the foreign currency depreciate) by roughly the rate gap. So the high-rate currency shows a forward discount. This also warns that carry-trade interest gains are often eroded by adverse FX moves.
What are forward contracts used for?
Their core use is hedging FX risk — locking the future exchange rate to remove uncertainty. Importers lock costs (pay foreign later), exporters lock revenues (receive foreign later), investors hedge overseas-asset principal. Hedging cuts bad moves but also forgoes good ones. Note the direction of the quote when interpreting premium/discount.
Can the forward rate predict the future spot?
No. The forward rate is a no-arbitrage price derived from today's spot and rate differential, not a prediction of where spot will be. On delivery day, actual spot is usually different, driven by data, policy, geopolitics and sentiment. Use forwards to lock price and hedge, not as a crystal ball.
Who actually uses forward contracts?
Mainly those with certain future FX flows who want to avoid rate risk: importers/exporters (lock payable/receivable rates), multinationals (repatriate profits), institutions with foreign debt/investments (hedge principal/interest), and investors/funds (currency-hedged returns). Forwards give certainty at the cost of forgoing favorable moves and carry obligation; options and swaps are alternatives. Consult a bank/licensed professional — this tool only explains pricing.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.