The difference between the current spot rate and the “expected” forward rate. In other words, this situation arises from a price relationship in which a forward price, often a currency exchange rate, is higher than the spot rate. This relationship, particularly in financial markets, often reflects the possible carrying cost of the underlying asset or instrument. In currency markets, it reflects the relative level of interest rates in the two countries whose currencies are exchanged, and indicates that interest rates are higher in the foreign currency country than in the domestic currency country.
January 21, 2025
