BANKING AFFAIRS

Detailed explanation-1: -What Is a Spot Exchange Rate ? A spot exchange rate is the current price at which a person could exchange one currency for another, for delivery on the earliest possible value date. Cash delivery for spot currency transactions is usually the standard settlement date of two business days after the transaction date (T+2).

Detailed explanation-2: -The standard settlement timeframe for foreign exchange spot transactions is T+2; i.e., two business days from the trade date. Notable exceptions are USD/CAD, USD/TRY, USD/PHP, USD/RUB, and offshore USD/KZT and offshore USD/COP and USD/PKR currency pairs, which settle at T+1.

Detailed explanation-3: -The spot rate is the price quoted for immediate settlement on an interest rate, commodity, a security, or a currency. The spot rate, also referred to as the “spot price, ” is the current market value of an asset available for immediate delivery at the moment of the quote.

Detailed explanation-4: -To calculate the forward rate, multiply the spot rate by the ratio of interest rates and adjust for the time until expiration. Forward rate = Spot rate x (1 + foreign interest rate) / (1 + domestic interest rate). As an example, assume the current U.S. dollar to euro exchange rate is $1.1365.

Detailed explanation-5: -In commodities markets, the spot rate is the price for a product that will be traded immediately, or “on the spot.” The spot rate is also known as the cash price since this is what can be exchanged for cash today.