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in order to understand foreign exchange rates we need to first understand spot exchange rates so lets define that a spot exchange rate is the current price in the market to trade one currency for another and an example of this would be if i wanted to immediately trade 95 yen for one dollar in usd so were just going out in the market trading one currency for another as fast as we possibly can that is the spot exchange rate so we just talked about in the spot exchange rate market if i need to trade one currency for another immediately but what if my needs are different what if i know that in one year from now im going to want to trade a certain currency for a different currency then we would use a currency forward contract now lets define that this is a contract in the foreign exchange market that locks in the price for the purchase or sale of a currency on a future date so an example of this would be lets say one year from today i need to trade again for us dollar well i would go o
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