Forward exchange rate

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Forward exchange rate

Exchange rate fixed today for exchanging currency at some future date.

Forward Foreign Exchange Rate

The agreed-upon exchange rate for a forward contract on a currency. When a forward contract is made, the parties agree to buy/sell the underlying currency at a certain point in the future at a certain exchange rate. The rate is negotiated directly between the parties, unlike a futures contract, which trades on an exchange. Partly because there is little secondary market for forward contracts, determining the forward foreign exchange rate is a zero-sum game: one party will gain on the contract and one will lose, depending on the movements of the relevant currencies between the formation of the contract and its maturity.
References in periodicals archive ?
Forward exchange rate contracts are used, among other things, to eliminate future spot exchange rate risk.
ICBC offered forward exchange settlement service to the enterprise, fixing the forward exchange rate of USD against RMB in three months at 6.
The forward exchange rate is estimated using IRP rather than PPP.
85 PKR 90 days from now at the 90-day forward exchange rate of 107.
In short, the above IRP equation says that the short term investment (or borrowing) in the domestic money market must be equal to the short term investment (or borrowing) in the foreign money market, then sold (or bought) forward for the home currency at forward exchange rate F to lock in the investment (or repayment) values.
Equation (4) implies directly that the forward exchange rate is equal to the market expectations of the future spot exchange rate.
The Forward Exchange Rate, Expectations and the Demand for Money : The German Hyperinflation, American Economic Review (67: 1997)
Assuming that the interest rate parity holds, the forward exchange rate will be 97.
5) The 'puzzle' is why does the forward exchange rate (that is, the exchange rate quoted today for the delivery and payment of funds on a future date) give biased forecasts of the spot exchange rate that will occur on the settlement date.
The modern approach to forward exchange rate determination suggests that the equilibrium forward exchange rate is determined by the actions of two groups, arbitrageurs and speculators.
8 million [euro] are multiplied by the forward exchange rate provided by Zeutsche Bank.
Especially in thin or volatile markets, dealers embed risk premia into their forward quotes, which will cause the forward exchange rate to deviate from the currency's expected future spot value.

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