Exchanging now versus agreeing to exchange on a future date
A spot deal settles within a few business days at today's rate. A forward is a promise to exchange on a set future date at a rate agreed now. The gap between the two follows almost mechanically from the difference in the two countries' interest rates.
With a 3% rate gap, a one-year forward sits about 3% away from spot.
For learning, not investment advice. Decisions are your own.
StockFit · TrueNorthLabs Inc.