Forward Points Explained Mastering Forward Exchange Rate Calculations

2481 reads · Last updated: January 9, 2026

Forward points are adjustments used to calculate the forward exchange rate in the foreign exchange market. The forward rate is derived from the spot rate plus or minus the forward points. Forward points reflect the interest rate differential between two currencies. If one country's interest rate is higher than another's, the forward points for that currency are usually negative, and vice versa. Forward points help traders and investors hedge against exchange rate risk, engage in hedging, or speculate.

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