The emergence of forward foreign exchange trading provides an excellent risk aversion channel for those engaged in trading. Generally, importers and exporters engaged in trade usually take a period of time between completing the quotation and actual receipt and payment of foreign exchange, and the exchange rate risk during this period is borne by themselves. If the importer and exporter obtain the contract, they will accept forward foreign exchange with the bank to lock in exchange rate , and this exchange rate risk can be avoided.
Since the delivery date of forward foreign exchange transactions is different from the delivery date of spot transactions, forward exchange rate must be appropriately adjusted depending on the interest rate difference between the two currencies and the length of the period. In the fully circulated foreign exchange market and the money market, the difference between forward foreign exchange exchange rate and spot foreign exchange exchange rate must fully reflect the interest rate difference between the two currencies; that is, the forward foreign exchange rate is calculated jointly by spot exchange rate plus the interest rate difference between the two currencies. In a market that is not fully circulated, forward foreign exchange rates not only include factors such as the difference between spot exchange rates and interest rates, but also include predictions of future exchange rate trends. In this case, the opportunity for arbitrage may arise due to the uneven capital situation in the market.
The valid interest start date of forward transactions for regular delivery is usually based on the delivery date of spot transactions on the trading day. For example, the valid value date of spot transactions on March 8 is March 10, and the delivery dates of 1-month and 3-month forward transactions on the same day are April 10 and June 10. If June 10 is a holiday, it will be postponed to June 11.
For one-month forward foreign exchange transactions that are traded on March 28, the effective interest date for forward transactions is April 30. If April 30 happens to be Saturday, because it is impossible to deliver across months, it will be pushed back to April 29. The last working day of April is the delivery date.
Forward foreign exchange transactions only stipulate the delivery period, but no specific delivery date is specified. The transaction party can freely choose the delivery date to conduct transactions within the validity period specified in the contract. If forward transactions are conducted between the bank and the client, the time to choose delivery is usually the client. If forward transactions occur between banks, the delivery date is usually the buyer's choice.
forward foreign exchange delivery date or settlement date is basically calculated on a monthly basis rather than on a day. The delivery date is determined on the spot foreign exchange delivery date or settlement date. That is, to determine the delivery date of forward foreign exchange transactions, first of all, you must determine the spot foreign exchange transaction delivery date. Because the forward foreign exchange transaction delivery date is the same day as the period specified in the forward foreign exchange contract after the spot foreign exchange transaction delivery date.
Therefore, a simple way to calculate the delivery date of forward foreign exchange transactions is: for the 3-month forward foreign exchange transactions that occur today, the first thing to do is to calculate the spot foreign exchange delivery date, and then push it back 3 months.
Tianyan reminder: Before doing foreign exchange transactions, you must review the qualifications and official website information of foreign exchange platform to prevent being deceived. If you encounter foreign exchange withdrawal problems or fraud, you should immediately collect evidence and report to the police, and expose and protect your rights!
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