What Is a Currency Forward?

The forward exchange rate is a symmetry of the "spot exchange rate." The exchange rate for forward foreign exchange trading. This is usually specified in a forward foreign exchange trading contract. When the forward contract expires, regardless of the spot exchange rate changes, the buyer and the seller must execute delivery at the forward exchange rate stipulated in the contract. The difference between the forward exchange rate and the spot exchange rate is called the forward spread, or the forward sink, and is usually expressed by premium, discount or parity. The forward exchange rate of a country's currency that is higher than the spot exchange rate is called premium, and the forward exchange rate that is lower than the spot exchange rate is called discount. The same is called parity. According to the theory of interest rate parity, the forward spread usually reflects the spread between the two currencies. That is, currencies with high interest rates generally show a discount, and currencies with low interest rates generally show a premium. The level of the forward exchange rate is directly related to the use of forward foreign exchange transactions to offset gains and losses, arbitrage and arbitrage, and profit and loss of speculative activities. ^[1]

Forward rate

Forward exchange rate refers to the exchange rate of a forward market transaction, and

Forward

Forward

The central bank said it would further strengthen

Forward exchange rate table

1, foreign currency conversion (exchange) and quotation at the spot exchange rate

(1) Foreign currency / local currency is converted into local currency / foreign currency. The exchange rate table published by the foreign exchange market of a country or region is often the number of local currencies equal to one or 100 foreign currencies, and the number of foreign currencies equal to one local currency is not published. If a foreign importer requires the domestic currency price of its export goods to be reported, the foreign currency price should also be reported. This can be divided by the specific number of the local currency to find out how many foreign currencies are converted into one local currency. (2) Foreign currency / local currency buy-sell price is converted into local currency / foreign currency purchase-sell price. Known foreign currency to local currency purchase-sell price. Ask the local currency to buy-sell the foreign currency. (3) Settlement of unlisted foreign currency / local currency and local currency / unlisted foreign currency The method of comparing the local currency to an unlisted currency is as follows: First list the intermediate exchange rate of the domestic currency to a listed major reserve currency. Check the intermediate exchange rates of pounds or US dollars against a currency that is not listed on major international financial markets such as London and New York (London or New York announces the exchange rate of pounds or dollars against all convertible currencies). Settle at the intermediate exchange rate of and the intermediate exchange rate of : divided by , that is, / = local currency / unlisted foreign currency exchange rate; divided by , that is, / = unlisted foreign currency / local currency exchange rate. (4) Local currency / A foreign currency and local currency / B foreign currency are converted into A foreign currency / B foreign currency and B foreign currency / A foreign currency.

The export quotation of an export commodity often involves many countries and multiple currencies, so it is necessary to master the method of settling between different foreign currencies in order to facilitate the expansion of the quotation range and the development of the commodity market. If known: the buying price and selling price of the local currency against one foreign currency; the buying price and selling price of the local currency against one foreign currency; how to settle: 1 buying of one foreign currency against one foreign currency Price and ask price. What is the buying price and selling price of 1 B foreign currency to A foreign currency? Now the method and procedure of its settlement are exemplified as follows:

Known: US New York market USD / Shilling 12.97-12.98 USD / Krona 4.1245-4.1255. Seek: Selling price and buying price of kr / shilling. The selling price and the buying price of shillings / krona. The method of arranging the selling and buying prices of the Krona / Shilling is as follows: The number of the Krona is in the denominator position, but the selling price and the buying price are transposed; that is, the buying price is at the selling price position. Up; the selling price falls on the buying price position. The number of shillings is in the numerator position, and the selling price and the buying price are not in a position of 12.97-12.98. / The figures obtained are the selling price and the buying price of CZK / shilling. The selling price for the krona / shilling is 12.97 / 4.1255 = 3.1439. The buying price for CZK / shilling is 12.98 / 4.1245 = 3.1470. If you ask for the selling price and the buying price of the shilling / krona, the method is as follows: The figure of the shilling is in the denominator position, and the selling price and the buying price are transposed, that is, from 12.98-12.98, the transposition is 12.98-12.97, The krona number is in a numerator position, and the selling price and the buying price are not in the same position, which is still 4.1245-4.1255. / The amount obtained is the shilling / Kroner selling price and buying price. The selling price for shillings / krona is 4.1215 / 12.98 = 0.3178. The buying price for shillings / krona is 4.1255 / 12.97 = 0.3181. (5) The spot exchange rate table is also the main basis for determining the acceptable level of import quotations. The use of spot exchange rates of different currencies for settlement (exchange) calculations not only plays a very important role in making export quotations, but also plays an important role in calculating whether the import quotations are reasonable and acceptable. Compare the import quotations of different currencies of the same commodity into RMB according to the RMB exchange rate table. Compare the import quotations of different currencies of the same commodity according to the spot exchange rate table of the international foreign exchange market after uniform conversion.

2. Reasonable use of the buying and selling prices of exchange rates

The difference between the purchase price and the selling price of the exchange rate is generally 1 3 . If the importer and exporter does not consider the price of the external price and perform the payment obligations carefully, the calculation is not precise, and the contract terms are not clear Suffer a loss. When using the buying and selling prices of exchange rates, pay attention to the following issues: (1) When converting domestic currency into foreign currencies, the buying price should be used. If the base price of a Hong Kong exporter's goods was originally in the local currency (Hong Kong dollar), but the customer requested to use a foreign currency for quotation, it should be converted based on the purchase price of the local currency and the foreign currency. The reason why an exporter converts domestic currency into foreign currency at the purchase price lies in the following: The exporter originally received the local currency, and now changes the foreign currency, and then needs to sell the received foreign currency to the bank and exchange it back to the original local currency. When an exporter sells a foreign currency, it is a bank purchase, so it is converted at the purchase price. (2) When converting foreign currency into local currency, the selling price should be used. The exporter's commodity base price was originally in foreign currency, but when the customer requests to use the local currency for quotation, it should be converted at the selling price of the foreign currency and the local currency. The reason why the exporter converts foreign currency into currency at the selling price is that the exporter originally received the foreign currency, but now changes to the local currency, and needs to buy back the original foreign currency from the bank in the local currency. The exporter's buy is the bank's sell. Therefore, it is converted at the selling price. (3) Convert one foreign currency into another foreign currency, and use the foreign exchange market price. The currency of the country where the foreign exchange market is located is regarded as the local currency, whether it is a direct market price or an indirect market price. If foreign currency is converted into domestic currency, the selling price is used; if local currency is converted into foreign currency, the purchase price is used. For example, × year × month × day, the foreign exchange market in Paris (direct price) is priced at 1 US dollar (foreign currency) and the purchase price is 4.4350 French francs: the same day in the New York foreign exchange market (indirect price), the US dollar against French franc is priced at 1 US dollar (local currency), the selling price is 4.4400 French francs (foreign currency), and the buying price is 4.4450 French francs. The method of conversion between the US dollar and the French franc is as follows: According to the Paris foreign exchange market (direct price): 1 US dollar French francs equivalent to 1 × 4.4550 = 4.4550, and 1 French franc equivalent to US dollars is 1 ÷ 4.4350 = 0.2255. According to the New York foreign exchange market (indirect price), the price of 1 French franc is equivalent to 1 ÷ 4.4400 = 0.2252. 1 US dollar is equivalent to 1 × 4.4450 = 4.4450. The above-mentioned principle of conversion of the purchase price and the selling price applies not only to the spot exchange rate but also to the forward exchange rate. The conversion and use of the purchase price and the selling price is a principle that foreign trade workers should master, but in actual business Should be flexible in accordance with specific circumstances. For example, the export products are less competitive, with more inventory, outdated styles, and sluggish markets. At this time, export quotations can also be converted at the middle price, and even appropriate discounts can be given to expand product sales; but actual workers "There is something in mind" about this principle.

3. Conversion of forward exchange rates and import and export quotes

(1) Forward rate of local currency / foreign currency is converted to forward rate of foreign currency / local currency. If the forward rate of the local currency / foreign currency is known, due to the need for quotation or hedging, the forward rate of the foreign currency / local currency needs to be calculated. The calculation procedure and method are: Substitute the formula: P * = P / (S × F), P * is the forward point converted from local currency / foreign currency to foreign currency / local currency, P is the forward point of foreign currency / foreign currency, S is the spot exchange rate of foreign currency / foreign currency, F is the actual forward of foreign currency / foreign currency exchange rate. After obtaining the forward exchange rate selling price points and buying price points according to the formula, their positions must be reciprocal, that is, the calculated buying price points become selling price points; the calculated selling price points become Bid price points. Example: Known, New York foreign exchange market USD / CHF, spot exchange rate, 3-month forward, 1.6030-40, 140-135, seeking: CHF / USD 3-month forward points. Calculation procedures and methods, Substitute into the formula: P * = P / (S × F), P * is: Swiss

The three-month forward point of the franc / USD is P: 0.0140-0.0135, S: 1.6030-1.6040, F: 1.6030 1.6040-) 0.0140 / 1.5890-) 0.0135 / 1.5905. Swiss Franc / USD 3-month forward point = .0055 = 0.0140 / 1.6030 × 1.5890, Swiss Franc / USD 3-month forward point = .0053 = 0.0135 / 1.6040 × 1.5905. Swiss Franc / USD 3-month forward selling and buying price points are transposed: 53-55. (2) The forward discount (points) in the exchange rate table can be used as the quotation standard for deferred collection. The premium currency in the forward exchange rate table is the appreciation currency, and the discount currency is the depreciation currency. Under the condition of deferred payment, the merchant requires a quote in two foreign currencies. If currency A is premium and currency B is a discount, if it is quoted in currency A, it will be quoted at the original price. The actual exchange rate after the currency A discount is reported to reduce the loss after the currency B discount. Therefore, learning to look up and calculate the exchange rate table is of great significance to the correct quotation. (3) The annual discount rate in the exchange rate table can also be used as the quotation standard for deferred collection. The discount currency in the forward exchange rate table, that is, the currency with a depreciation trend, and the annual discount rate of the currency, that is, the annual discount rate of the discount currency (for the premium currency). If a commodity was originally quoted in a harder (premium) currency, but the foreign importer requested to switch to a discounted currency, the exporter converts the premium currency amount to the discount currency amount based on the spot exchange rate. The discount rate should be added to the discounted price within a certain period. (4) In the import quotation of a soft and a hard currency, the forward exchange rate is the basis for determining the acceptance of the price increase of soft goods (discount currency). For example: In the import business, it takes about 3 months for a certain commodity to be paid from contract signing to foreign exchange. Foreign exporters quote in two currencies, hard (premium currency) and soft (discount currency). The rate of increase must not exceed the forward exchange rate of the currency and the corresponding currency. Otherwise, a coin quotation can be accepted. Only in this way can the purpose of not losing money in the price of goods and exchange rates be achieved.