Thus, by using FX forward contracts, investors can: The forward exchange rate depends on the spot exchange rate and the interest rate parity between the two currencies, which is the difference in interest that can be earned in the two countries with the corresponding currencies.
FX forward operations are related to specific risks: FX swap operations An FX swap agreement is a contract, in which one party simultaneously borrows one currency and lends another currency to a second party.
FX spot operations The spot contract is the most basic foreign exchange transaction in which one currency is exchanged for another at the current market rate (spot exchange rate).
Settlement of the contract is done within two days.
The contract virtually allows you to utilize the funds you have in one currency to fund obligations denominated in a different currency, without incurring foreign exchange risk.