Basic information on currency futures

You may seem that every time you turn on the TV, the news report about the weak dollar positions. The debate is usually conducted on how the weak dollar affects different markets. In contrast to the currency futures market, the size of the online Forex trading currency market is much more. This means that prices are dictated by the currency market, and he was subject to currency futures. What is the relationship between currency futures and spot prices, and how to put cash in the futures and vice versa?

The most active futures contracts sold 4 times a year: in the 3rd Wednesday of March, June, September and December. Unlike the futures market trading in the Forex market is every day. All transactions on the interbank market should be held directly.

Futures markets allow traders to buy and sell contracts, avoiding, thus cashing. This is possible at the conclusion of the quarterly futures contracts.
There is a misconception that future contracts are forecasting the price level spot at some point in the future. However, they are not. Future contracts - the result of differences in interest rates.

Eg., Assume that the exchange rate $ / yen should be immediately recorded in the year. This can be done, borrowed dollars a year. We translate dollars into yen and profit put on deposit for one year.After 12 months maturity period ends, and benefits used to fulfill the obligations of Jena. Price hedge loss equals the difference in interest rates. This difference can be used for betting on the spot Forex at their transformation into money. Such amounts are called future swaps.

Eg., US $ 12 month deposit / lending rate 6.25%

Yen 12-month deposit / lending rate 0.50%

The difference in interest rates = 5.75% $ / yen

The exchange rate 105.00 105.00 * -0.0575 =- 6.038 points
Of course, the transaction can be carried out by other means, fixing the price of the dollar against the yen. In this case, you lend yen and translate them into dollars. As a result of such trades, you will receive a 5.75% transaction. If future market does not coincide with the difference in interest rates, traders will try to quickly align them, using the deposit market.