Exchange Rate Quotations-Cont’d The figures shown below the spot quotation (i.e. 500-350) are the forward bid and ask points respectively. The forward points are either added or subtracted from their respective spot quotes to get the full forward quote. In the above case, the bid points exceed the ask points, which suggests that the points must be subtracted from the spot quotes to get the full forward quote, i.e. the full forward quotation is then 9.8065-10.0195. NB The decision to subtract derives from the fact that the bank should quote in away that ensures that the forward bid-ask spread exceeds the spot bid-ask spread. The excess bid-ask spread in the forward quotation compensates the dealer for the cost of carry and also for the additional risk of the forward contract. The indirect equivalent of the above spot quotation is 0.1015-0.0995, which means the bank will receive USD0.1015 for each ZAR paid to customers when buying USD, and pay USD0.0995 for every ZAR received from customers when selling USD. The corresponding 3 months forward point quote is 5-3. The full forward quote is obtained by adding the points to the spot quote, i.e. forward quote is 0.1020-0.0998. We add the points here because the indirect quote is the reciprocal of the direct quote
