About

A currency forward contract locks an exchange rate for a future settlement date. The forward rate F is not a forecast. It is derived mechanically from the spot rate S and the interest rate differential between two currencies via covered interest rate parity. Mispricing the forward by even 5 pips on a $10M notional generates a $5,000 error. Corporate treasurers hedging receivables, importers fixing costs, and fund managers rolling FX positions all depend on accurate forward point calculations. This tool computes the outright forward rate, forward points in pips, and the annualized premium or discount percentage for any tenor up to 10 years.

The calculator supports simple and compound interest conventions and three standard day count bases: ACT/360, ACT/365, and 30/360. Note: results assume flat yield curves and ignore credit spreads, cross-currency basis swaps, and settlement timing effects. For tenors beyond 1 year, compound interest mode is recommended because linear interpolation of rates introduces drift. Pro tip: always confirm which day count your counterparty quotes. A mismatch between ACT/360 and ACT/365 on a 6-month contract shifts the forward by roughly 2 - 4 pips on G10 pairs.

Formulas

The outright forward rate under covered interest rate parity using simple interest:

F = S × 1 + r_d × T1 + r_f × T

Under compound interest (recommended for tenors > 1 year):

F = S × (1 + r_d)^T(1 + r_f)^T

Forward points expressed in pips:

FP = F − Spip

Annualized forward premium (or discount if negative):

Premium = F − SS × 360days × 100%

Where S = spot exchange rate, r_d = domestic (quote currency) interest rate as decimal, r_f = foreign (base currency) interest rate as decimal, T = time fraction = days ÷ day base (e.g., 360 or 365), pip = 0.0001 for most pairs or 0.01 for JPY crosses, FP = forward points in pips.

Reference Data

Currency Pair	Typical Spot	Domestic Rate (approx.)	Foreign Rate (approx.)	3M Forward Points (pips)	Day Count Convention	Pip Unit
EUR/USD	1.0850	5.25%	3.75%	+40	ACT/360	0.0001
USD/JPY	154.50	0.10%	5.25%	−195	ACT/360	0.01
GBP/USD	1.2720	5.25%	5.00%	+8	ACT/365	0.0001
AUD/USD	0.6550	5.25%	4.35%	+15	ACT/360	0.0001
USD/CHF	0.8820	1.50%	5.25%	−82	ACT/360	0.0001
USD/CAD	1.3650	4.50%	5.25%	−25	ACT/360	0.0001
NZD/USD	0.6100	5.25%	5.50%	−4	ACT/360	0.0001
EUR/GBP	0.8530	5.00%	3.75%	+27	ACT/360	0.0001
EUR/JPY	167.60	0.10%	3.75%	−152	ACT/360	0.01
USD/SGD	1.3420	3.50%	5.25%	−58	ACT/365	0.0001
USD/HKD	7.8100	5.15%	5.25%	−19	ACT/365	0.0001
USD/MXN	17.15	11.00%	5.25%	+245	ACT/360	0.0001
USD/ZAR	18.70	8.25%	5.25%	+140	ACT/365	0.0001
USD/TRY	32.50	50.00%	5.25%	+3,625	ACT/360	0.0001
USD/INR	83.40	6.50%	5.25%	+26	ACT/365	0.01

Frequently Asked Questions

In covered interest rate parity, the currency with the higher interest rate trades at a forward premium relative to the lower-rate currency. This compensates for the interest rate differential so that no risk-free arbitrage exists. If the domestic (quote) rate exceeds the foreign (base) rate, you earn more holding the quote currency, so the forward rate F must be higher than spot S to eliminate the carry advantage.

Simple interest is the market standard for tenors up to 1 year (money market convention). Beyond 1 year, compound interest is appropriate because it reflects reinvestment of coupon payments. For a 6-month EUR/USD forward, use simple. For a 2-year cross-currency hedge, use compound. The difference on a 3-month contract is typically under 0.1 pip, but at 3 years it can exceed 50 pips.

ACT/360 divides actual calendar days by 360 (used for USD, EUR, CHF money markets). ACT/365 divides by 365 (used for GBP, AUD, CAD, JPY domestic markets). 30/360 assumes 30-day months. For a 90-day tenor, ACT/360 gives T = 0.25000 while ACT/365 gives T = 0.24658. On a spot of 1.0850 with a 1.50% rate differential, this shifts the forward by approximately 1 pip. Always match the convention your counterparty uses.

Forward points are the pip difference between the forward rate and the spot rate: FP = (F − S) / pip_unit. Dealers quote them as integers. For example, EUR/USD 3M forward points of +40 means the outright forward is spot + 0.0040. For USD/JPY, points of −195 means the forward is spot − 1.95. Positive points indicate a forward premium on the base currency; negative points indicate a discount.

No. Cross-currency basis swaps introduce an additional spread over SOFR/ESTR that reflects supply-demand imbalances for dollar funding. In stressed markets this basis can reach −30 to −50 basis points on EUR/USD. This tool uses textbook covered interest rate parity with clean rates. For precise interbank pricing, add the basis spread to the foreign rate before calculating.

Compare your contracted forward rate against the current market forward rate for the remaining tenor. Multiply the difference by the notional amount, then discount the result back to today using the domestic rate. This tool provides the current market forward rate; the MTM equals (Market Forward − Contracted Forward) × Notional / (1 + r_d × T_remaining). A positive value means your contract is in-the-money.