Rate), also known as spot exchange rate, refers to the exchange rate used by buyers and sellers for delivery on the same day or within two business days after a foreign exchange transaction is concluded. Forward exchange rate (forward)

Exchange rate) refers to the exchange rate for delivery on the agreed date in the future, and the buyer and the seller sign a contract in advance to reach an agreement. Forward foreign exchange transactions are introduced because foreign exchange buyers need foreign exchange funds at different times and avoid foreign exchange risks.

If a country's currency tends to strengthen and the forward exchange rate is higher than the spot exchange rate, the forward spread is called premium; If a country's currency tends to weaken and the forward exchange rate is lower than the spot exchange rate, then the forward spread is called discount. In practice, the forward spread is often expressed in points, each point is one ten thousandth, that is, 0.0005438+0.

The difference between spot exchange rate and forward exchange rate: under direct quotation, foreign exchange premium means that the forward exchange rate is greater than the spot exchange rate; Forward discount means that the forward exchange rate is lower than the spot exchange rate. Under the indirect pricing method, foreign exchange premium means that the forward exchange rate is less than the spot exchange rate; Forward discount means that the forward exchange rate is greater than the spot exchange rate. The relationship among spot exchange rate, forward exchange rate and swap exchange rate can be summarized as follows:

Under direct quotation: forward exchange rate = spot exchange rate+premium, forward exchange rate = spot exchange rate-discount.

Under indirect pricing method: forward exchange rate = spot exchange rate-premium, forward exchange rate = spot exchange rate+premium.

For the conversion relationship between spot exchange rate and forward exchange rate mentioned above, you must be proficient and able to use it.

In international financial practice, some foreign exchange banks do not specify whether the forward spread is a premium or a discount when quoting, but only quote two figures, one big and one small, which represent the difference between premium and discount respectively. However, it is necessary to judge which number is a premium and which number is a discount according to the specific situation. The specific rules are as follows:

(1) Under direct quotation, if the forward spread is in the form of "decimal to large number", it means that the forward exchange rate of the base currency is premium, and the forward exchange rate is equal to the spot exchange rate plus the forward spread.

(2) In direct quotation, if the forward spread is in the form of "large number to decimal", it means that the forward exchange rate of the benchmark currency is discounted, and the forward exchange rate is equal to the spot exchange rate minus the forward spread.

In other words, under the direct quotation, if the two figures of the forward spread given in the title are "small first and then large", it means that the forward premium can be added to the two exchange rate values (foreign exchange buying price and selling price) of a given foreign exchange. On the other hand, if the two figures of the forward spread given in the title are "big before and small after", it means the forward discount, and you can subtract two figures from the two exchange rate values of a given foreign exchange. Under the indirect price method, if the two figures of the forward price difference given in the title are "small first and then large", it means that the forward price is discounted, and these two figures (foreign exchange selling price and buying price) can be subtracted from the two exchange rate values given; On the other hand, if the two figures of the forward spread given in the title are "big before and small after", the forward premium can be added to the two exchange rate values of the given foreign exchange respectively.

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