Forward Quotes

 
What are Forward Quotes?

Forward quotes are used to represent and identify the future rates of the currency. These rates are used for currency trade and quoted as points multiplied by 0.0001 and then added to or subtracted from the spot quote. Typically, bid and ask spreads in the currency market are quoted separately. This bid-ask spread usually widens as the term of the forward contract increases.

Example of Forward Quotes:

Let's take an example of how forward rates are quoted. Let's take an example. A EURUSD three-month forward quote may be bid 89.11 and ask for 90.91.

Therefore, the three-month forward bid quote will be 1.13+ 0.008911 = 1.138911. 

The three-month forward ask quote is 1.13+ 0.009091 = 1.139091 

Why are Forward Quotes important?

Forward quotes are critical for quoting the price in the foreign exchange markets and play an essential role for risk managers to hedge.

Topics: ACCA, CIMA, CPD, AAT, FRM