Forward Exchange Rate Calculations
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Shamima AkterForward Exchange Rate Calculations
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Shamima AkterCommon questions
Powered by AIRounding periods to align with rates nearest to delivery dates can affect the choice of premium or discount periods applied to a rate. In the Canadian dollar contract, rounding to the earlier May period captures a premium rate benefiting the quote by realizing exchange terms promptly, giving TK 31.7411, rounded to TK 31.7400 per CAD .
Premium adjustments for Swedish Kronor increase the perceived value, raising the buy threshold as margins are added, leading to a cumulative selling rate calculated to be more expensive. Hence, the discount (TK 3.5000) subtracted and premium (SEK 0.2300) added, create a rate that incorporates these market conditions effectively for the finalized quote of TK 7.2225 per Kronor after margins .
The Dollar/Taka spot selling rate is TK 48.8500, from which a six-month discount of TK 3.5000 is subtracted, resulting in TK 45.3500. A telegraphic transfer selling exchange margin of 0.15% is added, making it TK 45.4180. An additional 0.20% margin for bill selling is added, resulting in a forward bills selling rate for Kroner of TK 7.2236 per SEK as rounded to TK 7.2225 .
The forward buying rate is calculated by considering TK 49.4875 as the starting US Dollar/Taka spot buying rate, to which a premium for May of TK 0.1100 is added, resulting in TK 49.5975. An exchange margin of 0.10% is then deducted, giving a forward rate of TK 49.5479. Since the US dollar is at a discount against the Canadian dollar, the one-month US dollar/Canadian dollar rate is considered and adjusted by a discount of CAD 0.0025, providing a forward buying rate for the Canadian dollar of TK 31.7411 per CAD, rounded to TK 31.7400 per CAD .
For an Australian dollar contract, the 25-day transit period alongside a premium against Taka and a discount against AUD leads to a rate quoted based on the end of October due to rounding. This results in TK 49.73500 before margin adjustments. Set against a three-month discount (AUD 0.0295), creating a transaction rate of AUD 1.8845, the effective quote is TK 26.3650 per AUD after all calculations .
US Dollar/Taka spot buying rate starts at TK 49.4875, with a premium for July added (TK 0.4600), resulting in TK 49.9475. An exchange margin of 0.10% is deducted, and the forward buying rate for US dollars becomes TK 49.8976. Since the US dollar is at a premium against the Singapore dollar, the rate with a 5-month premium of SGD 0.0235 is considered, leading to a forward buying rate for the Singapore dollar of TK 34.8617, rounded to TK 34.8625 per SGD .
The Swedish Kronor is quoted in the Singapore market with a spot USD/SEK of 6.0700 and a premium for six months of 2300/2500, resulting in a SEK rate of 6.3000 when a premium of SEK 0.2300 is added. This affects the forward bills selling rate for Kroner, resulting in TK 7.2236 per SEK after adjustments for exchange margins .
The choice of July Spot rate for a contract ending in August despite an additional transit period is because, when calculating due periods, the effective 25th August realization implies a benefit from earlier premium rates available in July. This selection optimizes the premium benefit before settling at the highest possible rate against transit conditions .
Rounding decisions determine whether earlier premium benefits are locked by cutting off at monthly intervals aligned with settlement times. Using July rounding captures the best premium capture and accounts for delayed realization by 20th September, underlining why a 5-month premium is chosen, influenced by its higher margin and tactical early placement for maximum forward return in the cycle summed here as TK 34.8625 per SGD .
In this scenario, the US dollars are at a premium against Bangladeshi Taka, and the premium for October is added to the Dollar/Taka spot buying rate to give a rate of TK 49.73500. An exchange margin of 0.10% is then deducted, resulting in TK 49.68526. Against the Australian dollar, the US dollar is at a discount. The selling rate is considered with a discount for three months, yielding a forward buying rate for the Australian dollar of AUD 1.8845. Using these calculations, the rate quoted is TK 26.3650 per AUD as detailed in .