Forward Points

AAA

DEFINITION of 'Forward Points'

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.

INVESTOPEDIA EXPLAINS '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).

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Basis Point - BPS

    A unit that is equal to 1/100th of 1%, and is used to denote ...
  3. Forex - FX

    The market in which currencies are traded. The forex market is ...
  4. Forward Rate

    A rate applicable to a financial transaction that will take place ...
  5. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  6. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
Related Articles
  1. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  2. Getting Started In Forex
    Options & Futures

    Getting Started In Forex

  3. 6 Factors That Influence Exchange Rates
    Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

  4. 4 Currency ETFs On The Move
    Chart Advisor

    4 Currency ETFs On The Move

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center