Currency Forward Calculator
Forward rate, points, and premium or discount.
Forward rate
Estimates for planning only, not financial advice.
A currency forward locks today\'s exchange terms for a future date using covered interest parity: with EUR/USD spot at 1.0850, a 5% dollar rate, a 3% euro rate, and 90 days, the forward rate is 1.0903, or +53 forward points. Enter spot, tenor, and both interest rates to get the forward rate, forward points in pips, and whether the base currency sits at a premium or discount. Forwards hedge known future cash flows; the quote is a hedging cost, not a forecast.
How to Use This Calculator
Enter the spot rate in standard quotation (e.g. 1.0850 EUR/USD), days until settlement, and the annualized interest rates for both currencies: domestic is the price currency (USD in EUR/USD), foreign is the base (EUR). The calculator returns the outright forward rate, forward points, premium/discount classification, and the annualized forward premium percentage.
Enter spot and tenor matching your actual exposure date.
Enter both rates: the rate gap is what moves the forward off spot.
Compare the outright forward to your budget rate. If it works, lock it; if not, consider options for flexibility.
The Forward Pricing Formula
The formula is no-arbitrage enforced: borrowing in one currency, converting at spot, investing in the other, and locking the forward must not print free money. The higher-rate currency must trade at a forward discount exactly offsetting its yield advantage. Day count is ACT/360, the FX market standard; points are quoted per 10,000 for most pairs (per 100 for JPY pairs).
Worked Example
A US importer must pay EUR 500,000 in 90 days. Spot EUR/USD 1.0850, USD 3-month rate 5%, EUR 3-month rate 3%. Forward = 1.0850 x (1 + 0.05 x 90/360) / (1 + 0.03 x 90/360) = 1.0850 x 1.0125 / 1.0075 = 1.0903. Forward points: +53. The euro sits at a forward premium because its rate is lower. Locking the forward fixes the cost at $545,150 (500,000 x 1.0903) versus $542,500 at spot: the $2,650 difference is the price of certainty, driven by the rate gap. If the euro instead collapses to 1.0500, the hedger still pays 1.0903: that is the insurance premium made visible.
Hedging Choices
| Instrument | Cost | Best for |
|---|---|---|
| Forward | Rate differential | Known amounts and dates |
| FX option | Upfront premium | Uncertain amounts; keep upside |
| Spot later | None | Views on direction; accepts risk |
| Money market hedge | Rate differential | Same as forward, DIY version |
Forwards dominate corporate hedging because they match odd amounts and dates with no upfront cash. The residual risks are counterparty exposure (mitigated by dealing with banks) and opportunity cost when spot moves your way. For simple conversion math without the forward element, our currency converter handles spot conversions, and our present value calculator covers the time-value mechanics underneath the formula.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is a currency forward?
A contract to exchange currencies at a fixed rate on a future date. An importer needing EUR in 90 days can lock today's forward rate instead of gambling on spot. Forwards are the workhorse of corporate FX hedging: customizable, no upfront premium unlike options, traded over the counter with banks.
How is the forward rate calculated?
By covered interest rate parity: Forward = Spot x (1 + r_domestic x t) / (1 + r_foreign x t). With EUR/USD spot 1.0850, USD rate 5%, EUR rate 3%, 90 days: 1.0850 x (1 + 0.05 x 90/360) / (1 + 0.03 x 90/360) = 1.0903. The higher-yielding currency trades at a forward discount; the math enforces it.
What are forward points?
The difference between forward and spot, quoted in pips: (Forward - Spot) x 10,000 for most pairs. In the example: (1.0903 - 1.0850) x 10,000 = 53 points. Positive points mean the base currency is at a forward premium; negative means a discount. Points scale with the interest-rate gap and the tenor.
What is covered interest rate parity?
The no-arbitrage rule that the forward rate must offset the interest-rate differential between two currencies. If it didn't, traders could borrow in the cheap currency, convert, invest in the dear one, and lock the forward for a risk-free profit. Persistent deviations signal capital controls, credit stress, or funding squeezes, not free money.
Why would a company use a forward instead of spot later?
To kill FX uncertainty: the importer knows its exact EUR cost today and can price products and margins with confidence. The trade-off is giving up favorable moves: if EUR weakens, the hedger still pays the locked rate. Forwards suit known future cash flows; options suit uncertain ones.
What is the difference between a forward and a futures contract?
Forwards are private bank contracts: any size, any date, settled at maturity, with counterparty risk. Futures are exchange-traded: standardized sizes and dates, daily margining, cleared centrally. Corporates hedging odd amounts and dates use forwards; speculators and standard hedges use futures. The pricing math is nearly identical.
What is a non-deliverable forward?
A forward for currencies with capital controls (like CNY, INR, BRL) that settles in dollars instead of the restricted currency. No actual currency changes hands; the P&L versus spot settles in USD. Companies with emerging-market exposure use NDFs where deliverable forwards don't exist.
How do forward rates relate to market expectations?
Loosely, at best. The forward rate reflects interest differentials, not a forecast: EUR/USD forward at 1.0903 does not mean the market "expects" 1.0903. Research consistently finds forwards are biased predictors of future spot. Never read a forward quote as a prediction; read it as the hedging cost.
What is forward premium vs discount?
A currency trades at a forward premium when its forward price exceeds spot (it has the lower interest rate); at a discount when below spot (higher interest rate). In the example the euro, with the 3% rate versus the dollar's 5%, sits at a forward premium of 53 points. Premium and discount describe the forward/spot relationship, not strength.
Can I compute forwards for any tenor?
Yes: enter days to settlement and both annualized rates. The day-count convention here is ACT/360, standard for most FX forwards. Longer tenors magnify the points: the same 2% rate gap gives roughly 4x the points at one year versus 90 days. This calculator handles tenors from a week to multi-year.