Forward Premium Explained What Is Forward Premium in Forex

1526 reads · Last updated: January 9, 2026

Forward Premium refers to a situation in the foreign exchange market where the forward exchange rate of a currency is higher than its spot exchange rate. Specifically, when you enter into a forward contract to buy or sell a currency at a future date, if the forward rate is higher than the current spot rate, this situation is called a forward premium. A forward premium typically reflects the market's expectation that the currency will appreciate in the future, or it may be due to the interest rate differential between the two countries.

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