Forward Points

What are 'Forward Points'

Forward points are the number of basis points added to or subtracted from the current spot rate to determine the forward rate. When points are added to the spot rate, there is a forward points premium; when points are subtracted from the spot rate, there is a points discount.

BREAKING DOWN 'Forward Points'

The number of forward points on a given exchange rate will be determined by the prevailing interest rates in each market, the time period between the spot and forward rate, and other market factors. For example, if the current spot rate of the USD/EUR is 0.7232 and the two-year forward rate is 0.7332, the number of forward points is 100 basis points (0.7332-0.7232).

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    Understand the difference between a spot rate and forward rate. Learn why someone would enter into a contract with a spot ... Read Answer >>
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  3. What is the difference between a forward rate and a spot rate?

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  4. Over what time period should I be looking at the forward rate?

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