This calculator works out the forward exchange rate for a currency pair, based on today's spot rate and the interest rate differential between the two currencies, using covered interest rate parity.
Enter the spot rate, both currencies' interest rates, and the number of days, and the calculator returns the forward rate, closely related to how carry trade strategies work in practice.
This calculator is for educational purposes only and uses simplified covered interest rate parity. Not financial advice.
The forward rate reflects the interest rate differential between the two currencies over the contract period, known as covered interest rate parity, a currency with a higher interest rate typically trades at a forward discount, one with a lower rate at a forward premium, this isn't a market prediction of future spot price.
Forward contracts are primarily used by businesses and institutions hedging future foreign currency exposure, for example, an exporter expecting Dollar payment in 90 days can lock in today's forward rate to remove exchange rate uncertainty from that future transaction.
No, a forward premium purely reflects the interest rate differential, not a market forecast of future spot price direction, forward rates and actual future spot rates frequently diverge, since the forward calculation is a mathematical relationship, not a prediction.
Your broker's overnight swap or rollover rate is conceptually related to forward pricing, both derive from the same interest rate differential concept, though your specific broker's swap rate includes their own markup, distinct from a pure institutional forward rate.
Common standard periods include 30, 60, 90, and 180 days, though genuinely customised periods are also available in institutional markets, this calculator lets you enter any number of days for your specific scenario.