Cryptocurrency Q&A
How do forward exchange rates affect currency exchange rates?
How do forward exchange rates affect currency exchange rates?
Fri Jan 10 2025
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5 answers
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I'm interested in understanding how forward exchange rates influence currency exchange rates. I want to know the dynamics between these two and how they impact each other.
5 answers
Sat Jan 11 2025
Conversely, if the interest rate in the country selling the currency is higher, the forward currency will be traded at a discount.
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Sat Jan 11 2025
Forward exchange rates are determined primarily by two key factors.
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Sat Jan 11 2025
The first of these is the spot exchange rate, which reflects the current market value of one currency in terms of another.
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Sat Jan 11 2025
The second factor is the interest rate differential between the two currencies involved in the forward exchange.
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Sat Jan 11 2025
When the interest rate in the country whose currency is being bought is higher, investors anticipate a gain from holding that currency and, therefore, the forward currency is traded at a premium.
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