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What is meant by the three-month forward exchange rate?

What is meant by the three-month forward exchange rate?

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A forward exchange rate is the exchange rate that will be applicable for future transactions. Forward rates are calculated on the spot rates and adjusted for the carrying cost. It is the exchange rate at which a commercial bank is willing to exchange one currency for another. For example a person who expects to receive 10,000 euros after 3 months can lock the USD-Euro exchange rate of the amount. In that case, he will receive the forward exchange rate fixed by the contract rather than the spot price after 3 months.

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