The purchase or sale of a foreign currency, commodity and financial instrument for immediate delivery is usually referred to as a spot trade. This value for which these goods and services are exchanged for the other is determined or governed by a spot rate. Most of the contracts involved in spot trade are usually physical deliveries of the currencies, commodities or instruments. The difference in the price of a future or forward contract versus a spot contract usually takes into account the time value of the payment which is based on interest rates and time to maturity.
Spot trading usually refers to the spot forex market where currencies are electronically traded around the world. Most of the spot currency trades settle after two business days after the execution of the trade except for the U.S dollars vs Canadian dollar which settles in the next business day. Euro vs the U.S dollars followed by the U.S dollars vs Japanese yen are the most commonly traded currency pairs in the world. Other currency pairs that do not include the U.S dollar are referred to as the cross currencies with the Euro vs yen as the most traded pairs.
WHAT IS THE 'SPOT RATE?
A spot rate is an amount or price quoted for immediate settlement on a commodity, a security or a currency. This can also be referred to as the spot price and it is based on the value of an asset at the moment of the quote. Simply put, AUD SGD spot rate is the amount or price quoted for the immediate settlement on the exchange of AUD to SGD. The AUD SGD spot rate is dependent on how much the buyers are willing to pay or the sellers are willing to accept and this depends on the market value and the expected future market value. As a result of these, the AUD SGD spot rates change frequently or sometimes drastically. The AUD SGD spot rate is generally influenced by the forces of demand of the individuals and businesses wishing to transact in the currencies as well as the forex traders.
The AUD SGD spot rate can be used to determine the forward rate i.e the price of a future financial transaction since the currency’s expected future value is partly based on its current and the risk-free rate until the time it eventually matures. With this, the forex traders can extract the unknown AUD SGD spot rate if they have an idea of the future prices of the currencies.
THE AUD SGD EXCHANGE RATE
At the time of writing this, the exchange rate for AUD/SGD is 1/1.03. The AUD/SGD rate depreciated from 1.0633 in October to 1.0261 in November.
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