Discussion of Forex Trading and Currency Trading

How do you determine if a currency is selling at a forward discount or forward premium?

For instance if given the following rates for USD/EUR

Spot~~~~~~1.4642 - 1.4662
1 month~~~ 30 - 60

In this case, would the Euro be selling at a forward discount or premium? And why?

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One Response to “How do you determine if a currency is selling at a forward discount or forward premium?”

  1. Man WIth No Name Says:
    May 15th, 2010 at 6:46 am

    This formula might help,

    [(Forward rate - spot rate)/Spot rate)] *(12/no of forward months)*100

    Premium if postive , Discount if negative

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