Forward Rate
FundamentalsAn exchange rate agreed today for settlement at a future date, derived from the spot rate and the interest-rate gap between the currencies.
A forward rate is an exchange rate agreed today for a currency exchange that settles at a specified future date, calculated from the spot rate adjusted for the interest-rate differential between the two currencies. Businesses and institutions use forward contracts to lock in a rate and hedge future currency exposure.
Retail traders rarely trade outright forwards, but the same interest-rate-differential logic is what produces the swap/rollover charge on an open leveraged position.
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