FX convention: 360-day year
Input the current spot exchange rate as units of domestic currency per 1 unit of foreign currency.
Provide the annual risk-free rate for both the domestic (quote) and foreign (base) currencies.
Enter the number of days to forward settlement (typically 30, 60, 90, 180, or 360).
Add a foreign currency amount to compute the locked domestic value at the forward rate.
Review the forward rate, forward points, annualized premium/discount, and locked amount.
Covered interest rate parity says that an investor borrowing one currency at its risk-free rate, converting at spot, investing in the other currency, and converting back at the forward rate must earn zero arbitrage profit. Solving for the forward rate gives the formula above. When the domestic interest rate is higher than the foreign rate, the forward trades at a premium to spot (more domestic per foreign in the future). When the foreign rate is higher, it trades at a discount.
Forward = Spot × (1 + Rd × t) / (1 + Rf × t)
Forward rates are NOT a forecast of where spot will move — they are an arbitrage-free price derived from interest rates
Use the 360-day count for FX (most major currencies follow this convention; GBP and a few others use 365)
When the domestic (quote) rate is higher, the forward is at a premium to spot
When the foreign (base) rate is higher, the forward is at a discount
Forward points are quoted in pips: a 50-pip premium on EUR/USD means 0.0050 above spot
Bank quotes add a bid-ask spread on top of the theoretical forward — this calculator gives the mid
Match the day count to the actual settlement date; small differences materially move the forward for short tenors
A forward exchange rate is the price agreed today for exchanging one currency for another at a specific future date. Unlike spot rates, forward rates incorporate the interest rate differential between two currencies — a principle known as covered interest rate parity. If the foreign currency offers a higher interest rate than the domestic currency, the forward rate will be at a discount to the spot rate, and vice versa. This relationship prevents risk-free arbitrage between money markets and currency markets. Forward contracts are among the most widely used instruments in international finance: corporations use them to lock in exchange rates for future receivables and payables, importers and exporters hedge transaction risk, and fund managers protect international portfolio returns from currency fluctuations. The global FX forward market averages over $1 trillion in daily turnover. The forward rate formula is straightforward: Forward Rate equals Spot Rate multiplied by (1 + domestic rate times days/360) divided by (1 + foreign rate times days/360), using the appropriate day count convention. This forward rate calculator computes the outright forward rate, forward points, annualized forward premium or discount, and the implied cost of hedging for any currency pair, tenor, and interest rate inputs.
Forward exchange rates exist to let companies and investors lock in a price today for a future foreign currency transaction, eliminating exchange rate risk. An importer who knows they will pay €1m in 90 days can buy a 90-day EUR/USD forward and remove all uncertainty about the dollar cost. The forward rate is set by interest rate parity, not by where the market thinks spot will move.
Banks usually quote forwards as forward points added to or subtracted from the spot rate, rather than as an outright forward rate. A quote of '+50 pips for 3 months' on EUR/USD means the 3-month forward is 50 pips above spot. Our calculator returns both: the outright forward rate to five decimal places and the equivalent forward points so you can verify against any bank quote.
Data sourced from trusted institutions
All formulas verified against official standards.