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Forward Premium

What does Forward Premium mean?

Forward Forex rates are not provided by exchanges but rather quoted by banks and dealers.  Banks quote forward rates for major currencies in maturities of one, three, six, nine, or twelve months.  Forward rates are generally different from the spot rates. If the forward rate of a foreign currency is quoted higher than the spot price, the difference is forward premium. It indicates the foreign currency is likely to appreciate.

Futures Knowledge Explains Forward Premium

For example, on June 19th 2015, while spot rate for USD/INR was INR 63.82, August forward rate was INR 64.39. Thus dollar is carrying forward premium.

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